Is Pakistan’s proximity to Saudi Arabia costly? UAE demands its billions of dollars back

The effect of increasing tension in the Middle East is now clearly visible on Pakistan’s economy. The situation has become such that Pakistan suddenly has to take a big economic decision. After the demand of loan return by United Arab Emirates (UAE), Pakistan has decided to return 3.5 billion US dollars, which has given rise to a new economic and diplomatic discussion.

Actually, UAE had given this amount to Pakistan to manage its economic situation and keep the balance of payments stable. Now due to increasing conflict and instability in the Middle East, UAE wants to withdraw its funds. Earlier this loan was “rolled over” every year, that is, the repayment period was extended. But this time the situation is different and UAE has demanded immediate withdrawal.

Where was this money kept?

According to sources, this amount of $3.5 billion was kept as safe deposit in State Bank of Pakistan. Pakistan will return the entire amount to Abu Dhabi by the end of this month. Pakistan was also paying interest at the rate of about 6 percent on this deposit amount.

Till now UAE kept increasing the tenure of this loan every year, which provided relief to Pakistan. In December 2025 also, this amount was increased first for one month and then for two months. But this time instead of taking it forward, UAE has demanded the entire amount back.

Impact on Pakistan’s financial situation

At present, Pakistan has more than 21 billion dollars in foreign exchange reserves, due to which it is in a position to repay this debt. However, experts believe that in the coming times, Pakistan may again need external financial assistance.

In the current financial year, Pakistan required a total external deposit of about 12 billion dollars. This included contributions from countries like Saudi Arabia, China and UAE. In such a situation, this step of UAE can pose a challenge for Pakistan.

The reason behind proximity to Saudi Arabia?

According to reports, a defense agreement between Pakistan and Saudi Arabia has made this situation more complicated. It is being told that UAE has become angry after this agreement. Given the competition between Saudi Arabia and UAE in regional politics, Abu Dhabi did not like Pakistan’s inclination towards Riyadh.

For this reason, UAE first reduced the loan rollover period and now has demanded the entire amount back. Due to this, Pakistan is stuck in a difficult situation, where on one hand it has to manage its strategic relations and on the other hand it is facing economic pressure.