KARACHI: Pakistan is entering a critical phase of debt management as it prepares to repay $4.8 billion in external obligations during April 2026, Mian Zahid Hussain, President of the Pakistan Businessmen and Intellectuals Forum, announced today. The impending payments include the settlement of $3.5 billion in loans to the United Arab Emirates and the redemption of a $1.3 billion Eurobond maturing on April 8. These financial commitments pose a significant challenge to Pakistan's foreign exchange reserves and highlight the urgent need for structural economic reforms.
According to Pakistan Businessmen and Intellectuals Forum, the repayment schedule for the UAE debt has been finalized, with $450 million due on April 11, followed by $2 billion on April 17, and the final $1 billion on April 23. The UAE's demand for repayment contrasts with previous expectations of long-term rollovers. The $1.3 billion Eurobond repayment is a critical moment for Pakistan's international capital market standing. Despite the State Bank of Pakistan's reserves amounting to approximately $16.4 billion, these outflows will pressure the liquidity position. A significant portion of the reserves consists of deposits from friendly nations, requiring replacement through exports and foreign direct investment.
Mian Zahid Hussain noted that the repayments' impact on the exchange rate and domestic inflation is a primary concern. While the State Bank has kept the policy rate at 10.5%, reserve depletion could trigger market volatility. The federal primary surplus and reduced interest costs are positive indicators, but reliance on short-term borrowing at increased interest rates is unsustainable. Global geopolitical shifts, including regional tensions involving Iran, make bilateral lenders more cautious about liquidity.
The business leader emphasized the need for Pakistan to transition from a debt-based economy to an investment-led growth model. Prioritizing debt conversion into equity and investment projects, particularly with Gulf partners, is crucial. Addressing obstacles hindering initiatives like the $250 million Panda Bond issuance is imperative. To escape the debt trap, Pakistan must increase value-added exports and attract foreign investment. Without broadening the tax base and resolving energy sector issues, the country remains vulnerable to external debt maturities.