By S.M. Inam
ISLAMABAD: Pakistan’s external financing gap is expected to widen after the government decided to repay $2 billion in deposits to the United Arab Emirates (UAE) this month, along with a 6 percent interest payment.
As a result, Islamabad will either need to manage the increased financing gap independently or persuade the International Monetary Fund (IMF) to adjust the foreign exchange reserves held by the State Bank of Pakistan (SBP) at the end of June 2026, Metro Morning reported.
On the eve of striking a staff-level agreement with the IMF under a $7 billion Extended Fund Facility program, the foreign exchange reserves target for June 2026 was revised downward from $17.8 billion to $17.5 billion at the SBP.
“The external financing gap was then estimated at around $460 million, based on overall dollar inflows and outflows in FY26,” senior officials told The News.
It had been anticipated that deposits of $3.7 billion from the UAE and Kuwait would be rolled over during the fiscal year, but the latest development indicates that Pakistan is set to repay $2 billion to the UAE around mid-April 2026. The remaining $1 billion is expected to mature in June or July.
With the broader IMF agreement in place, the external financing gap could rise to $2.46 billion, plus interest. A senior official told The News that Pakistan is engaging at the highest diplomatic levels to manage geopolitical tensions and emphasized that repaying the deposits is a matter of honor. While options are being explored, the official said these cannot be disclosed without confirmation.
