KARACHI: Pakistan has repaid $1.4 billion against the maturity of a Eurobond on April 8, Adviser to the Finance Minister Khurram Schehzad said in a post on X on Tuesday.
The payment was expected, but it has unsettled market sentiment amid reports that Pakistan may also repay up to $3.5bn to the UAE this month.
Analysts say these outflows could make it difficult for the State Bank of Pakistan (SBP) to achieve its foreign exchange reserves target of $18bn by the end of the current fiscal year.
The ongoing conflict in the Middle East has already impacted Pakistan through rising inflation, higher fuel prices and pressure on trade and industry. Additional dollar outflows could further strain the exchange rate.
Over the past year, the central bank, with government support, maintained exchange rate stability by curbing imports, tightening controls on dollar smuggling and managing foreign exchange flows. This helped prevent panic in the market despite prolonged regional tensions.
However, experts warn that the situation is becoming more challenging as export markets in Gulf countries face disruption and remittance inflows could also come under pressure.
Pakistan has also paid $126 million in coupon payments on other Eurobond issuances. In addition, the government faces repayment obligations of about $3bn to the UAE, which had been placed with the SBP to support reserves and rolled over since 2018.
A further $450m is due to the UAE this month, taking the total expected outflow to around $3.5bn.
Financial sector sources say Pakistan has so far maintained a strong record of meeting its external obligations and is expected to honour these repayments. However, the timing of the payments has raised concerns due to the evolving situation in the Gulf.
Saudi Arabia and China also hold significant deposits with the SBP to support foreign exchange reserves.
Experts say the IMF may take into account the impact of the Middle East conflict on Pakistan’s reserve position. However, they caution that any decline in remittances could further complicate the situation.
The SBP has been actively purchasing dollars from the interbank market to build reserves and meet debt servicing needs.
Analysts warn that continued pressure on reserves could destabilise the exchange rate at a time when the country faces rising import costs, particularly for petroleum products.
Published in Dawn, April 8th, 2026
