Pakistan Repays $3.5 Billion Debt to UAE With Saudi Financial Support

Pakistan's Prime Minister Shehbaz Sharif announced that the country has successfully repaid $3.5 billion in mandatory bilateral debt, crediting the pivotal support from Saudi Arabia for making this achievement possible without destabilizing foreign exchange reserves. According to Sharif, this financial milestone strengthens market confidence in Pakistan's ability to meet international obligations, as stated in his address to the cabinet.

The repayment specifically settled deposits owed to the United Arab Emirates, totaling around $3.45 billion, with the State Bank of Pakistan confirming the final $1 billion tranche. This came after the UAE requested the immediate return of funds deposited in 2018 to bolster Pakistan's reserves amid economic pressures. The payments were made in phases throughout April: $450 million on April 11, $2 billion on April 17, and $1 billion on April 23, drawing from reserves hovering near $16.4 billion.

Saudi Arabia played a crucial role by providing a fresh $3 billion deposit, alongside extending a previous $5 billion deposit, as announced by the Kingdom to enhance Pakistan's economic stability. Sharif expressed deep gratitude to King Salman bin Abdulaziz and Crown Prince Mohammed bin Salman, describing the aid as a reflection of longstanding ties rather than temporary relief. This follows a pattern of Saudi support, including a $6 billion package in 2018 with oil payment deferrals.

The development matters amid Pakistan's broader economic challenges, including a $7 billion IMF program, falling exports, rising borrowing costs, and additional pressures like a $1.3 billion Eurobond due in April, pushing total obligations to about $4.8 billion that month. While the UAE repayment signals strained ties and a shift from rollovers to full settlement—possibly influenced by regional tensions such as the Middle East war—Saudi backing has helped maintain reserve stability.

For Pakistanis, this averts immediate default risks but underscores ongoing vulnerability, with reserves reliant on allied deposits rather than strong inflows. Looking ahead, Islamabad continues talks to convert some UAE debt into investments, while Saudi cooperation at institutional levels could yield further positive results. The episode highlights the intricate web of Gulf support propping up Pakistan's finances in a volatile global landscape.