Pakistan has decided to return $3.5 billion in debt to the United Arab Emirates (UAE) before the end of the month, even as the country grapples with soaring fuel prices and mounting political unrest.
Debt Repayment Framed as ‘National Dignity’ Move
According to a report by Dawn, a senior Pakistani official said the early repayment was aimed at upholding “national dignity,” despite the strain it is expected to place on the country’s fragile economy.
The funds were part of financial assistance extended by Abu Dhabi in 2019 through the Abu Dhabi Fund for Development to stabilise Pakistan’s balance of payments. The UAE has now reportedly sought immediate repayment.
Reserves Under Pressure Amid IMF Commitments
Pakistan’s foreign exchange reserves currently stand at around $16.3 billion. Repaying roughly $3 billion could reduce reserves by nearly 18%, significantly weakening the country’s external buffer.
The move comes as Pakistan remains under an International Monetary Fund (IMF) programme, which requires it to secure about $12.5 billion in rollovers from allies such as China, Saudi Arabia, and the UAE to maintain financial stability.
Economic experts warn that the repayment could increase pressure on the Pakistani rupee and complicate ongoing IMF commitments, especially in the absence of fresh inflows.
Government Assures Monitoring of External Flows
Amid concerns, Pakistan’s Finance Ministry stated that it is closely monitoring external financial flows to ensure stability in foreign exchange reserves. However, no immediate alternative funding arrangements have been announced.
Fuel Price Surge Sparks Political Chaos
The economic strain has been compounded by a sharp rise in fuel prices, triggering chaos in Pakistan’s National Assembly.
Lawmakers were unable to proceed with a scheduled 90-point agenda after opposition members staged a strong protest against the steep hike. Petrol prices surged by 43%, while high-speed diesel (HSD) saw a 55% increase.
The revised rates now stand at PKR 458.4 per litre for petrol and PKR 520.35 per litre for diesel, according to Dawn.
Assembly Session Adjourned Amid Protests
The uproar forced Deputy Speaker Ghulam Mustafa Shah to adjourn the session without completing any legislative business.
The session was expected to address key issues, including solar net metering policies and multiple bills, but was derailed by protests over the fuel price hike.
Crisis Deepens Amid Global Pressures
The government has attributed the fuel price spike to a global energy crisis linked to the ongoing Middle East conflict.
With rising inflation, dwindling reserves, and increasing political tensions, Pakistan faces a challenging economic and governance landscape in the weeks ahead.
