The much-hyped rollover risk for Pakistan’s external debt is now materialising. Reports indicate that repayment of USD 2 billion in UAE deposits with the State Bank of Pakistan (SBP) was due in recent weeks, with initial doubts about routine rollovers.
While the UAE has granted a one-month stay at 6.5 percent interest, with talks ongoing for longer terms, this short reprieve highlights just how precarious the situation remains.
Pakistan’s external debt profile is heavily short-term and exposed to geopolitical risks, as a major portion comes from “friendly” countries such as the UAE, Saudi Arabia, and China. Geopolitical factors may be hindering a longer extension from the UAE, perhaps tied to regional dynamics.
Even if settled through alternatives, for instance with Saudi Arabia stepping in, these episodes starkly expose vulnerabilities just as the government claims to be shifting from stability to growth.
This is not new. In 2020–21, amid frictions with Saudi Arabia over geopolitical issues, Pakistan repaid $2 billion in Saudi loans, only for China to step in as rescuer. Saudi support later resumed.
Now, with fresh hurdles over UAE debt, China may maintain distance, but Saudi Arabia could potentially fill the gap. That might also sideline the proposed $2 billion UAE-based joint fund venture with the Fauji Foundation.
Meanwhile, last week’s negative news, Barrick Gold placing the Reko Diq project under review, adds to the caution.
READ MORE: Barrick reviews Reko Diq project
Citing security concerns following recent insurgent attacks in Balochistan, the company is reassessing security arrangements, development timelines, and capital budgets. Whether directly linked or not, Reko Diq is now in limbo.
Much of the recent euphoria stems from geopolitical tailwinds: minerals and rare earth exploration touted as game-changers, improved regional positioning in the new world order, the Saudi defence pact, US closeness, and prospective Gulf investments. Yet there is many a slip ’twixt the cup and the lip.
Things can shift quickly, and only nations with buffers and sovereignty can play the long game.
India, for instance, withstood tough US tariff threats under President Trump because it had resilience. It eventually secured a better deal than Pakistan or Bangladesh.
Pakistan has a real opportunity to climb the ladder in this evolving global order. Its military strength could position it among middle-tier powers. But that will remain aspirational without economic sovereignty. Decision-making is hostage to the continuance of an extractive equilibrium, while the nation as a whole keeps its head just above water.
The basics matter. Pakistan’s domestic economy needs to reallocate resources to allow a transformation toward greater efficiency and global competitiveness. Only then can it integrate into global value chains.
No country truly depends on our exports, yet we rely heavily on imports, remittances, half of which come from just the UAE and Saudi Arabia, a clear concentration risk, and support from friendly nations and Western multilaterals.
The bottom line is that Pakistan remains at the receiving end, lacking both economic viability and ideological clarity. This precludes negotiating from a position of strength. Others can, and do, dictate terms due to our intrinsic vulnerabilities.
Nevertheless, hope remains that the country develops contingency plans to reduce such enfeebling dependence. That would foster better, more balanced external relations without being forced into any camp.
That, however, is easier said than done. The prerequisite of domestic strength and social cohesiveness needed to navigate shark-infested geopolitical waters is, for now, missing.
Copyright Business Recorder, 2026
Ali Khizar is the Director of Research at Business Recorder. His Twitter handle is @AliKhizar