Karachi: Pakistan is facing a financial challenge as the United Arab Emirates has requested the repayment of deposits totaling approximately $3.5 billion, in addition to a $1.3 billion Eurobond repayment due in April 2026. Despite these demands, the foreign exchange market has remained stable, and the Pakistani rupee has appreciated slightly, contrary to expectations.

According to JS Global, Pakistan plans to repay the UAE deposit and has made arrangements to manage the financial outflow, though specific details of these arrangements have not been disclosed. The country's foreign exchange reserves are at a four-year high, with the State Bank of Pakistan holding $16.3 billion, banks possessing $5.4 billion, and gold reserves amounting to $10 billion.

There are reports that the Pakistani government has secured funds from two friendly nations to address the payment requirements. The government had previously requested Saudi Arabia to convert $5 billion into long-term deposits and increase its deferred oil payment facility to $5 billion, which could help manage the outflow of $4.8 billion.

Pakistan's reliance on short-term external debt remains a concern, although the public external debt-to-GDP ratio has decreased to 26% from 32% in June 2023. To manage the situation, the government may consider currency swaps, which currently stand at $1.8 billion, or the State Bank of Pakistan might intervene in the foreign exchange market to stabilize reserves. The central bank’s reserves are considered sufficient to maintain currency stability in the short term, and administrative measures may be employed to manage foreign exchange reserves and the balance of payments.