New Delhi/Islamabad, April 4 (NationPress) Under increasing pressure, Pakistan has consented to repay a total of around USD 3.5 billion in loans and deposits to the United Arab Emirates (UAE) by the close of April, following a request from the Gulf nation for the immediate return of these funds.

This decision comes amid reports indicating that the UAE has sought the rapid return of the money, primarily due to regional instability associated with the ongoing conflict in West Asia involving the US, Israel, and Iran.

Various media outlets and senior officials in Pakistan have confirmed that Abu Dhabi recently requested this repayment, marking an end to the traditional rollovers that Pakistan had relied upon for many years.

On Saturday, Pakistan's Ministry of Foreign Affairs released a statement strongly rejecting what it termed “misleading and unfounded commentary” regarding this issue.

The ministry characterized the repayment as a “routine financial transaction” conducted under mutually agreed commercial terms and emphasized that the deposits illustrated the UAE's support for Pakistan's economic stability.

However, the timing and circumstances surrounding the UAE's request have sparked concerns regarding the strain on Pakistan's financial condition.

A senior cabinet member confirmed the decision to settle the entire debt, with repayments planned in three installments: $450 million on April 11, $2 billion on April 17, and $1 billion on April 23. One of these payments includes a longstanding loan of $450 million from 1996-97.

Officials indicated that these funds are likely to be sourced from the current foreign exchange reserves of the State Bank of Pakistan, which stand at approximately $16.4 billion.

Simultaneously, discussions are reportedly in progress to convert a portion of this amount into an investment, rather than executing a full cash repayment. This situation has been perceived as somewhat awkward for Pakistan, which has historically depended on friendly deposits from the UAE, Saudi Arabia, and China to strengthen its reserves under the IMF program.

Earlier this year, Prime Minister Shehbaz Sharif publicly expressed feelings of “embarrassment” while seeking such external financial assistance, acknowledging that it often constrains the country’s policy flexibility. Despite the outflows, Pakistani officials have asserted that reserves remain at “comfortable” levels.

The nation has pledged to maintain allied deposits intact until the ongoing $7 billion IMF program concludes in September 2027. This rapid repayment—transitioning from long-term or short-term rollovers to complete settlement within just weeks—underscores Pakistan’s ongoing struggles to manage external debt and secure new investment inflows while under IMF scrutiny.

This move comes as Pakistan's exports have decreased and foreign investment remains sluggish, exacerbating the economic challenges facing Islamabad.