Pakistan seeks $10b in US backstop facility
Pakistan has formally requested a 10 billion dollar exchange stabilisation facility from the United States to boost its foreign exchange reserves and stabilise its economy, according to a source familiar with the development.
The request, addressed to US Treasury Secretary Scott Bessent, seeks a Bilateral Exchange Stabilisation Support Facility with a maturity period of up to five years.
This move follows Pakistan’s involvement in facilitating negotiations regarding the Iran war, an effort that elevated the country’s diplomatic standing and fueled expectations of economic support from Washington and international partners.
If approved, the 10 billion dollar facility would help replenish Pakistan’s central bank reserves, reduce downward pressure on the rupee, and decrease dependency on multilateral lenders.
It would also provide financial flexibility as Islamabad continues implementing strict fiscal and monetary measures mandated under its 7 billion dollar International Monetary Fund programme.
These IMF-guided measures have required politically challenging tax hikes, spending cuts, and structural reforms to ensure fiscal discipline.
Neither the Pakistani Ministry of Finance nor the US Treasury immediately responded to requests for comment regarding the proposal.
US Exchange Stabilisation Facilities, typically administered through the Exchange Stabilisation Fund, are rare financial mechanisms that provide foreign governments with dollars, currency swaps, or guarantees.
These backstops differ from the Federal Reserve’s permanent standing swap lines with major foreign central banks.
A 2025 financial package provided to Argentina represented the first new exchange stabilisation facility granted to a foreign government since Uruguay in 2002, alongside Mexico’s long-standing swap agreement dating back to the 1940s.
Pakistan narrowly avoided a debt default in 2023 by securing a 3 billion dollar IMF standby arrangement, which was later succeeded by the current 7 billion dollar Extended Fund Facility.
However, its foreign reserves remain heavily dependent on official loans, debt rollovers, and financial deposits from bilateral partners like Saudi Arabia and China.
This reliance leaves the country vulnerable to delays in IMF disbursements and shifts in bilateral support, as demonstrated in April when Pakistan repaid approximately 3.5 billion dollars to the United Arab Emirates, representing a fifth of its reserves, while receiving 3 billion dollars in fresh backing from Saudi Arabia.
Despite these vulnerabilities, Pakistan’s central bank projected in January that its foreign exchange reserves could approach their 2021 historical high, reaching 20 billion dollars by the close of 2026.
In April, rating agency Fitch noted that compliance with the IMF programme has enhanced Pakistan’s funding capacity, while rebuilt foreign exchange buffers offer a cushion against economic shocks stemming from Middle East instability.
However, Fitch cautioned that escalating global energy costs and potential supply disruptions could rapidly erode these reserve buffers.
Furthermore, foreign direct investment in Pakistan remains constrained due to recurring external account crises, policy shifts, security concerns, historical restrictions on profit repatriation, and a narrow export base.
The nation’s credit rating remains firmly in speculative-grade territory, limiting access to international capital markets and keeping borrowing costs high.
To navigate these economic pressures, Islamabad has sought deeper engagement with the Trump administration through various commercial and investment initiatives.
These efforts include signing a stablecoin agreement for cross-border transactions with an affiliate of World Liberty Financial, advancing a memorandum of understanding to redevelop the Pakistan International Airlines-owned Roosevelt Hotel in New York with the US government, and encouraging US investment in the domestic mining sector, where the US Export-Import Bank announced 1.2 billion dollars in financing for the Reko Diq project.
