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Pakistan is preparing to repay $3.5 billion to the United Arab Emirates this month, a senior cabinet minister said in a briefing on Friday.

The decision was announced while briefing the anchorpersons in the minister’s office, the Express Tribune reported.

About $450 million out of the 3.5 billion package was taken out in 1996-97 for one year and will be paid back next week. Pakistan will now be returning the amount after 30 years, a government official said. The amount will be followed by $2 billion and another $1 million later in the month.

Some of the senior government officials said that the discussion was taking place to convert a portion of the amount into an investment.

The UAE had been reportedly reluctant to rollover the debt another year as the US-Israel-Iran war expedited the process. This had led to the preparations to repay the debt.

The repayment is set to put pressure on Pakistan’s foreign exchange reserves, which are already under stress.

Using the country’s reserves to repay the large amount could also weaken the country’s ability to manage its external finances.

The UAE had also charged an interest rate of 3 per cent on the debt in 2018, which was increased to 6.5 per cent.

The situation has also become tense due to the county’s closeness to Iran during the war.

In 2018, the UAE provided about $2 billion to Pakistan. However, Pakistan was unable to repay the amount and sought a rollover since then.

In 2023, the country once again requested another $1 billion from the UAE to help the country’s meet its external needs.

In totol, Pakistan will be paying back abut $4.8 billion debt in April, including the Eurobond on April 8.

Pakistan has continued to rely heavily on the support from friendly countries as part of its programme with the International Monetary Fund.