By Saima Afzal
The recent repayment of a long-term deposit to the United Arab Emirates has been interpreted by some as a sign that Pakistan is once again under fiscal pressure. That reading doesn’t quite hold up. If anything, the move points to something more significant - a gradual shift from fragility toward a more stable and credible external position.
This comes at a time when the global economic environment remains unsettled. Interest rates are still high, energy markets are unpredictable, and capital flows are less forgiving than they were a few years ago. For economies like Pakistan, where external stability has often been uneven, the ability to meet obligations without disruption carries real weight. These moments tend to be read carefully, not just within the country, but by investors and partners watching from the outside.
It’s easy to forget how strained things were not too long ago. In 2022, Pakistan’s foreign exchange reserves had fallen to dangerously low levels, dropping below $7 billion at one point. There was little room to manoeuvre. Even routine payments started to feel like a stretch. Markets were nervous, imports had to be restricted, and confidence in the overall direction of the economy was thin.
The turnaround since then hasn’t been dramatic, but it has been steady. A mix of policy decisions-tightening spending, adjusting the exchange rate, and maintaining monetary discipline-helped stabilize the situation. Engagement with the International Monetary Fund provided a framework, while support from bilateral partners and consistent remittance inflows gradually eased pressure on the external account.
Now, the improvement is visible. By mid-2025, reserves had climbed to around $14.5 billion, up from just over $9 billion a year earlier. The upward trend has continued into 2026, with total liquid reserves reaching roughly $21.79 billion by late March. That’s a significant recovery-more than triple the levels seen at the peak of the crisis—even if still modest compared to some countries in the region.
More importantly, it has given the economy a bit of breathing space. Seen against this backdrop, the repayment to the UAE looks far less dramatic than it is sometimes portrayed. Countries repay what they owe—that’s how the system works. The real issue is whether they can do so comfortably. Pakistan, at this point, appears to be in a better position to manage such obligations than it was a few years ago.
Calling this repayment a sign of strain misses the point. What matters is whether the country has the capacity to absorb it. With reserves in a stronger position and policies relatively stable, there is little indication that this payment disrupts the broader economic balance. If anything, meeting obligations on time helps rebuild trust - something Pakistan has had to work hard to restore.
The relationship with the UAE also deserves attention here. It isn’t just about deposits or repayments. The UAE remains an important economic partner and hosts a large Pakistani community, whose remittances continue to support the external account. In that sense, honouring commitments is part of maintaining a broader relationship built over decades.
More broadly, this moment reflects a subtle shift in how Pakistan is managing its economy. The underlying challenges haven’t gone away-growth is still uneven, fiscal pressures remain, and the country is not immune to external shocks. But there is a difference between managing a crisis and managing an economy. The ability to meet obligations without falling back on rollovers or emergency support suggests that the situation, while still delicate, is more under control than before.
That doesn’t mean everything is settled. The recovery is still vulnerable to global conditions and domestic policy choices. But compared to where things stood in 2022, the direction is clearer. The conversation is slowly moving away from immediate crisis concerns toward questions of sustainability and credibility.
Which is why the repayment to the UAE should be seen in a different light. It isn’t a sign of weakness. It’s a sign that the system, at least for now, is holding.
Pakistan’s economic story is still evolving, and there is a long way to go. But developments like this—quiet, routine, easy to overlook-often say more than dramatic headlines. The repayment of long-term deposits doesn’t point to strain. It suggests an economy that, after a difficult period, is beginning to steady itself again.
(Saima Afzal is an independent and freelance researcher specializing in South Asian security, counter-terrorism, the Middle East, Afghanistan, and the Indo-Pacific region. )
The views expressed are personal and not necessarily those of The South Asian Times
