Pakistan Faces Pressure with $3.5 Billion UAE Loan Repayment

Pakistan is set to repay a $3.5 billion loan to the UAE within the month, putting pressure on its reserves and risking a breach of its IMF programme. The repayment follows due Eurobond obligations, amidst rising fuel costs and inflation affecting economic recovery.

Pakistan is poised to return a substantial $3.5 billion loan to the United Arab Emirates this month, according to government officials, raising concerns over the nation's foreign exchange reserves.

The move comes as Pakistan aims for reserves above $18 billion by June under the terms of a $7 billion International Monetary Fund (IMF) programme. Finance advisor Khurram Schehzad confirmed the country has already cleared $1.43 billion in external debt, including a $1.3 billion Eurobond due in April.

The repayment adds pressure to Pakistan's central bank reserves, currently at $16.4 billion, as economic challenges like rising fuel costs and inflation persist. The previous loan arrangements allowed for annual extensions, but Islamabad has opted for full repayment, potentially impacting its adherence to IMF programme targets.

(With inputs from agencies.)