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Pakistan's foreign reserves have been severely depleted by the UAE's recent demand for repayment of overdue deposits and loans worth $3.5 billion, which Islamabad has done by late April 2026. The amount is part of other bilateral transactions since 2019 that had been rolled over, but not this time around.

This follows a UAE disgust with a Pakistan that "would play an impartial to mediatory role in the US-Iran conflict" and secured closer relations with Saudi Arabia in a Gulf diplomatic dispute. Abu Dhabi was infuriated at Pakistan moderating.

The Indian Link: The UAE has boosted its economic and strategic relationship with India in recent years and is "more invested." Responding to this, Pakistani politicians like controversial Senator Mushahid Hussain warn about India's "Akhand Bharat" intentions, demonstrating Islamabad's concerns.

Pakistan claimed the repayment was a "question of dignity" and raced to find other sources of cash to keep IMF targets on track. The incident presages a more pragmatic stage in UAE-Pakistan relations.