New Delhi, April 18 Fundamental issues continue to plague Pakistan, including in the Middle East, where a dispute over financial deposit repayments threaten its relationship with the UAE, according to a new report.
Earlier this month, the Pakistan government announced that it would be repaying $3.5 billion worth of loans to the UAE.
This includes a loan of $450 million that Pakistan has owed the UAE since the late 1990s, according to the report in Geopolitical Monitor.
The report says that the amount owed to the UAE represents nearly one fifth of Pakistan’s entire foreign exchange reserves, undoing significant efforts taken by the government to increase this total in line with IMF regulations.
“This demand for repayment also comes at a precarious time, where rising oil costs, already whittling away at the country’s finances, are projected to cause a rise of up to $1 billion in import costs,” the report mentions.
Pakistan has been on the brink of economic collapse for years.
In 2023, Human Rights Watch declared that the country was facing one of the worst economic crises in history, with the economy remaining fragile to this day.
The report further says that structural weaknesses in the economy left Pakistan particularly vulnerable to global shocks, particularly the inflationary pressure and supply chain disruptions.
Moreover, a key condition of the IMF bailout in September 2024 was that Pakistan rebuild its foreign exchange reserves, which had fallen below $10 billion that financial year.
Although there has been no confirmation, Pakistan’s recently signed defence agreement with Saudi Arabia may well have put strain on its relations with the UAE, amid growing tensions between the Gulf kingdoms over Yemen. Moreover, UAE’s displeasure with Pakistan’s closeness to Iran is what apparently triggered the immediate recall of funds.
Pakistan is now facing a significant economic challenge at yet another point of global instability.
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