- As part of an agreement reached at the IMF staff level, the foreign exchange reserve target for June 2026 was reduced to $17.5 billion.
- External financing gap estimated at $460 million, according to main official sources.
- Deposits of $3.7 billion from the UAE and Kuwait were to be rolled over in the current financial year.
Pakistan’s external financing gap is likely to widen after the government decided to repay $2 billion in deposits in the United Arab Emirates (UAE) this month, along with a 6 percent interest payment.
As a result, Islamabad will either have to manage the increased financing gap on its own or persuade the International Monetary Fund (IMF) to adjust the foreign exchange reserves held by the State Bank of Pakistan (SBP) by the end of June 2026, News reported.
On the eve of reaching an IMF staff-level agreement under a $7 billion Extended Financing Facility program, the foreign reserves target for June 2026 was revised downward from $17.8 billion to $17.5 billion held by the SBP.
“The external financing gap was subsequently estimated at around $460 million, based on overall inflows and outflows of dollars in FY26,” senior official sources confirmed. The News.
It was estimated that the deposits of $3.7 billion from the UAE and Kuwait would be rolled over in the current fiscal year, but the latest developments show that Pakistan is ready to repay $2 billion of deposits in the UAE around mid-April 2026. It is assumed that the remaining $1 billion could be paid in June or July 2026 on its due date.
Given the broader agreement with the IMF, the external financing gap would widen even further, so the overall gap could reach $2.46 billion plus a 6% interest payment. When contacted, a senior official told The News that Pakistan was engaged at the highest diplomatic level to play a mediating role in geopolitical tensions.
On the maturity of deposits, he said it was a matter of dignity to return the amount owed to the lender with a thank you packet. He added that options are available and will be explored, but cannot be disclosed without confirmation.
The official further said that Pakistan was in a comfortable position to repay its external obligations. Although this could result in a temporary reduction in foreign exchange reserves, it would not pose a challenge like the one the country has faced several times in the past, such as after the 1998 nuclear detonation and on many other occasions.
The official said the IMF would be convinced that the outbreak of war had put pressure on the external front, and that he hoped the Washington-based global lender would understand the situation and show a lenient attitude towards Pakistan.
When contacted, IMF Pakistan Resident Chief Mahir Binci said in a brief response that he would follow up on this issue.
Meanwhile, in an official statement issued on Saturday, the Ministry of Foreign Affairs categorically rejected recent misleading and unfounded comments regarding UAE financial deposits held with the SBP.
It said the filings demonstrated “the UAE’s strong support for Pakistan’s economic stability and prosperity,” it said in a statement.
FO clarified that the government, through the SBP, was returning matured deposits to the UAE in accordance with mutually agreed terms.
“This is a routine financial transaction, and any attempt to portray it otherwise is erroneous and misleading,” he said.
FO maintained that Islamabad and Abu Dhabi shared a “long-standing fraternal partnership” based on trust and strategic cooperation in the areas of trade, investment, defense and people-to-people ties.
The relationship, he says, has stood the test of time and grown stronger with each passing year.
The Ministry of Foreign Affairs said Pakistanis appreciated the key role played by the late Sheikh Zayed bin Sultan Al Nahyan in strengthening ties between Pakistan and the UAE and his deep affection for the country.
Pakistan remains fully committed to further strengthening its ties with the UAE for a common and prosperous future, the statement added.
