Pakistan’s already weak economy is coming under fresh pressure as the country prepares to repay $3.5 billion to the United Arab Emirates this month, even as relations between the two sides show signs of strain.
According to a report by The Express Tribune, Islamabad has decided to return the loans in phases throughout April.
The report said that around $450 million will be paid next week, followed by $2 billion and another $1 billion later in the month.
The move comes after months of uncertainty over these loans. Unlike in the past, when Gulf countries often gave Pakistan more time to repay, the UAE had only been extending the loans for short periods. This change signals a tougher stance from a long-time ally.
The repayment is expected to put pressure on Pakistan’s foreign exchange reserves, which are already under stress.
Using reserves to pay back such a large amount could weaken the country’s ability to manage its external finances.
The situation has become more serious due to recent tensions with United Arab Emirates. Reports suggested that Abu Dhabi is unhappy with Pakistan’s perceived closeness to Iran during the ongoing regional conflict.
