Iran War Effect: UAE Tightens Grip, Pakistan Set to Return $3.5 Billion

Islamabad: Another major pressure on Pakistan's economy has come to light amid the Iran-Israel war. The United Arab Emirates (UAE) has demanded back its loan worth billions of dollars from Pakistan, after which Islamabad has also decided to repay it. According to media reports, Pakistan is going to return the loan of about 3.5 billion dollars to UAE this month.

Why did UAE suddenly demand loan repayment?

According to reports, due to the ongoing tension in the Middle East and the Iran war, the UAE decided to ask for its funds back. Earlier, this amount used to be 'rollovered' every year, that is, the deadline for payment was extended, but this time Abu Dhabi insisted on an immediate refund.

How important was this amount for Pakistan?

This loan was kept in the State Bank of Pakistan as a kind of 'safe deposit', which helped in managing the balance of payments of the country. Pakistan was also paying about 6% interest on this amount.

Does Pakistan have the capacity to repay it?

Reports indicate that Pakistan currently has foreign exchange reserves of more than $21 billion, with which it can make this payment at present. However, experts believe that Pakistan may need external financial help in the coming months.

Is this decision an economic blow to Pakistan?

Experts are considering this as a big blow for Pakistan, because the country is already struggling with inflation, an oil crisis and debt pressure. At such a time, withdrawal of a large amount of money can further weaken the financial situation.

Are there diplomatic reasons behind the withdrawal?

Some reports also indicate that UAE has been angered by Pakistan's growing closeness and defense agreements with Saudi Arabia. For this reason, it has shown strictness regarding the repayment of loans, due to which Pakistan has come under pressure on two fronts.

Can further difficulties increase?

The ongoing war in the Middle East, rising oil prices and external debt pressure, all three are having a simultaneous impact on Pakistan's economy. In such a situation, maintaining economic balance can prove to be a big challenge for the country in the coming times.