Pakistan to Repay $3.5B UAE Loan, Risking IMF Program Targets as Reserves Dwindle

Pakistan is preparing to repay a $3.5 billion loan to the United Arab Emirates this month, a move expected to significantly strain its foreign exchange reserves. The repayment comes as the country struggles to meet the International Monetary Fund (IMF) requirement of maintaining reserves above $18 billion by June. Current reserves stand at approximately $16.4 billion, and without a loan rollover, the upcoming payment could push levels well below the IMF’s mandatory threshold. Furthermore, Pakistan faces an additional obligation to settle $1.3 billion in maturing Eurobonds before the end of the second quarter. Analysts warn that the depletion of dollar liquidity increases sovereign default risks and threatens the continuity of the $7 billion IMF bailout package. This fiscal pressure is likely to weigh heavily on the Pakistani Rupee (PKR) and the performance of the nation's international debt instruments.