Islamabad is asking Washington for a five-year exchange stabilization facility that could strengthen foreign reserves, support the rupee and reduce Pakistan’s dependence on IMF disbursements and emergency assistance from regional allies.
By yourNEWS Media Newsroom
Pakistan has asked the United States to establish a $10 billion exchange stabilization facility as Islamabad seeks to convert its elevated diplomatic role in negotiations over the Iran war into greater economic support from Washington.
The proposed arrangement would provide Pakistan with a major financial backstop at a time when the country remains dependent on International Monetary Fund assistance, foreign deposits and emergency financing from allies to protect its currency and meet external obligations.
According to a source briefed on the request, Pakistan asked U.S. Treasury Secretary Scott Bessent to consider creating a Bilateral Exchange Stabilization Support Facility between the two governments.
The requested facility would be valued at $10 billion and could remain available for as long as five years.
If approved, the program could provide dollars, currency swaps, guarantees or other forms of support intended to strengthen Pakistan’s reserves and stabilize the rupee during periods of financial stress.
It could also reduce Islamabad’s reliance on delayed IMF disbursements, temporary deposits from foreign governments and repeated debt rollovers.
The request follows Pakistan’s involvement in brokering talks related to the Iran conflict, a diplomatic role that increased its international profile and raised expectations that the government might seek economic concessions from the United States and other partners.
The U.S. Treasury declined to comment on the reported proposal.
Pakistan’s Finance Ministry did not immediately respond to a request for comment submitted outside Asian business hours.
Pakistani Finance Minister Muhammad Aurangzeb met with Bessent in Washington on Tuesday, though a ministry statement describing the talks did not mention the $10 billion request.
The statement said Aurangzeb discussed the vulnerability of Pakistan’s economy to regional geopolitical instability and asked for expanded American assistance as the country attempts to regain dependable access to international financial markets.
“Senator Aurangzeb sought greater U.S. support for Pakistan’s road to market, underpinned by improved access to international capital markets, higher foreign exchange reserves, and enhanced sovereign credit ratings,” the ministry said.
The two governments also reaffirmed their intention to expand bilateral economic cooperation, encourage additional U.S. investment and advance projects considered strategically important, according to the statement.
The proposed stabilization facility would be unusual because the U.S. Treasury rarely provides such arrangements to foreign governments.
They are generally administered through the Treasury Department’s Exchange Stabilization Fund and can offer foreign countries access to dollars, swaps, guarantees or other emergency resources intended to protect currency markets and preserve financial stability.
Those mechanisms differ from the permanent dollar swap lines maintained by the Federal Reserve with a limited number of major foreign central banks.
Federal Reserve swap lines operate as standing channels for supplying U.S. dollars to important global financial systems. Treasury stabilization facilities are more selective and are generally created in response to specific economic or strategic circumstances.
A financial package approved for Argentina in 2025 represented the first new exchange stabilization facility for a foreign government since a 2002 arrangement involving Uruguay, excluding the United States’ long-standing swap relationship with Mexico.
The Mexican arrangement dates to the 1940s and is currently valued at $9 billion.
Pakistan’s request would therefore exceed the size of the Mexican line and represent one of the most significant U.S. currency-support commitments to a foreign government in decades.
For Islamabad, the proposal comes after years of recurring balance-of-payments crises.
Pakistan narrowly avoided default in 2023 after securing a $3 billion IMF standby arrangement.
The country later obtained a $7 billion Extended Fund Facility from the IMF, along with a separate $1.3 billion loan designed to strengthen resilience to climate change and natural disasters.
Those agreements helped prevent immediate financial collapse, but they also imposed strict fiscal and monetary requirements.
Pakistan remains under the discipline of the $7 billion IMF program, which requires tax increases, spending restraint and structural reforms that have proved politically unpopular.
The program has limited the government’s ability to increase development spending or expand social welfare programs while households contend with higher taxes and economic pressure.
Despite the IMF support, Pakistan’s foreign reserves continue to depend heavily on official financing, debt rollovers and deposits from China, Saudi Arabia and other friendly governments.
That dependence leaves the country vulnerable when outside support is delayed, withdrawn or conditioned on political developments.
The risk became especially clear in April when Pakistan repaid approximately $3.5 billion to the United Arab Emirates.
That payment represented about one-fifth of the country’s foreign exchange reserves at the time.
Saudi Arabia subsequently provided $3 billion in new support, helping offset much of the sudden decline.
The episode illustrated how quickly Pakistan’s reserve position can deteriorate when a major creditor demands repayment and how heavily Islamabad relies on fresh assistance from another partner to restore liquidity.
Pakistan’s central bank said in January that reserves could rise to approximately $20 billion by the end of 2026, approaching the record level reached in 2021.
Achieving that target, however, will depend on continued IMF compliance, export earnings, foreign investment, debt rollovers and support from bilateral partners.
A U.S. stabilization facility could serve both as an emergency source of liquidity and as a political endorsement of Pakistan’s economic program.
Access to a large American backstop could reassure investors, reduce pressure on the rupee and improve confidence in Pakistan’s ability to meet debt obligations.
It could also support Islamabad’s effort to improve its sovereign credit rating and return to international bond markets on more affordable terms.
Pakistan’s current credit rating remains deep within speculative-grade territory, making commercial borrowing expensive and restricting market access.
Ratings agency Fitch said in April that Pakistan’s adherence to its IMF program had strengthened the country’s funding position.
Fitch also said rebuilt foreign currency buffers offered some protection against economic shocks associated with the Middle East conflict.
The agency nevertheless warned that higher energy prices and disruptions to regional supply routes could rapidly drain those reserves.
Pakistan imports much of its energy, leaving the country particularly exposed when oil and natural gas prices rise.
Higher energy costs increase the amount of foreign currency needed to pay for imports, widen the trade deficit and place additional downward pressure on the rupee.
The country’s narrow export base provides only limited protection against those pressures.
Foreign investment has also remained weak because of recurring financial emergencies, uncertainty over economic policy, security concerns and earlier restrictions on companies attempting to repatriate profits.
Those factors have discouraged long-term investment even as Pakistan promotes its large population, strategic location and mineral resources.
The proposed U.S. facility could help address some investor concerns by signaling that Washington is prepared to support Pakistan during periods of market instability.
It would not, however, eliminate the structural problems that have repeatedly produced financial crises.
Pakistan would still need to expand exports, increase tax collection, reduce losses in state-owned enterprises, improve its energy system and create a more predictable environment for private investment.
Islamabad has increasingly used its relationship with the Trump administration to pursue economic partnerships in cryptocurrency, mining, real estate and infrastructure.
Pakistan signed an agreement involving stablecoin-based cross-border payments with an affiliate of World Liberty Financial, the primary cryptocurrency business associated with President Donald Trump’s family.
The country has also pursued a memorandum of understanding involving redevelopment of the Roosevelt Hotel in New York.
The property is owned by Pakistan International Airlines and has been closed.
Pakistani officials have discussed a possible redevelopment arrangement involving the U.S. government as Islamabad seeks to generate value from the prominent Manhattan property.
Mining has emerged as another major area of cooperation.
Pakistan has courted American investment in its mineral sector, including the Reko Diq copper and gold project.
The U.S. Export-Import Bank has announced $1.25 billion in financing connected to the project.
Reko Diq is considered one of Pakistan’s most significant undeveloped mineral assets and could become an important source of export revenue if production expands as planned.
The proposed stabilization facility would deepen that economic relationship by moving beyond individual investments and projects into direct support for Pakistan’s financial system.
It could also strengthen cooperation between Washington and Islamabad at a time when Pakistan is attempting to balance relationships with the United States, China, Saudi Arabia and other regional powers.
China remains one of Pakistan’s largest creditors and infrastructure partners, while Saudi Arabia has repeatedly supplied deposits and emergency financing.
A substantial U.S. facility could diversify Pakistan’s sources of support and reduce its dependence on any single partner.
For Washington, the decision would involve both economic and geopolitical considerations.
Supporters could argue that stabilizing Pakistan would reduce the risk of default, political unrest and broader instability in a nuclear-armed country with a population exceeding 240 million.
They could also point to Pakistan’s role in facilitating Iran-related diplomacy and its potential importance in regional security.
Critics could question whether American funds should support a government with a long history of IMF rescues and repeated financial crises.
They may also demand strict conditions to ensure that any assistance promotes lasting reforms rather than postponing another emergency.
The structure of the facility would determine how much risk the United States assumes.
Important unresolved details include whether Pakistan would receive direct dollar access, whether the arrangement would operate as a swap or guarantee, what interest rate would apply and what collateral or policy commitments Islamabad would be required to provide.
It is also unclear whether the facility would need congressional approval or could be established through existing Treasury authority.
Any agreement would likely be closely coordinated with Pakistan’s IMF program to avoid undermining the fiscal and monetary reforms already required under that arrangement.
Pakistan is seeking the support while continuing to impose higher taxes and spending controls intended to preserve economic stability.
Those measures have improved some financial indicators but have imposed significant political costs on the government.
A U.S. backstop could give Islamabad more room to manage temporary shocks without immediately pursuing another emergency loan.
It could also reduce the risk that a delayed IMF payment or withdrawal of bilateral support would trigger a currency crisis.
The request has not been approved, and neither government has publicly confirmed that formal negotiations are underway.
The Treasury Department’s refusal to comment leaves open whether U.S. officials view the proposal favorably or consider the requested amount and duration excessive.
Pakistan’s diplomatic role in the Iran talks may have provided Islamabad with an opportunity to make the request, but it does not guarantee American approval.
The decision will depend on whether the Trump administration believes that Pakistan’s strategic value, reform program and financial vulnerability justify a rare use of the Exchange Stabilization Fund.
If accepted, the five-year, $10 billion facility would provide Pakistan with one of the strongest financial safety nets it has ever received from Washington.
It would also mark a substantial expansion of U.S.-Pakistan economic cooperation, transforming recent partnerships in digital finance, real estate and mining into a direct commitment to the stability of Pakistan’s currency and reserves.
Original article
Comments