By Staff Reporter
ISLAMABAD: Pakistan has approached the United States seeking a $10 billion exchange stabilisation facility, a request that would mark one of the largest such arrangements the US Treasury has extended to a foreign government in decades, Reuters reported on Tuesday.
The request, reported here for the first time, was made to Treasury Secretary Scott Bessent and asks for a Bilateral Exchange Stabilisation Support Facility with a maturity of up to five years. It comes as Islamabad tries to capitalise on the elevated diplomatic standing it earned by helping broker talks during the Iran war, a role that fueled expectations in Pakistan that it could translate into economic support from Washington and other allies.
If granted, the facility would strengthen Pakistan’s foreign reserves, take pressure off the rupee and lessen the country’s dependence on multilateral lenders — even as the government sticks to the tighter fiscal and monetary policies demanded under its International Monetary Fund program. Pakistan remains bound by the terms of a $7 billion IMF facility that has forced unpopular tax increases, spending cuts and structural changes.
Pakistan’s finance ministry did not respond to a request for comment outside of Asia business hours. The US Treasury also did not immediately respond to a request for comment.
Exchange stabilisation facilities are an uncommon tool in the Treasury’s arsenal, typically financed through the Exchange Stabilisation Fund to supply dollars, currency swaps or guarantees that help a country defend its reserves and currency. They differ from the standing dollar swap lines the Federal Reserve maintains with a handful of major central banks, which function as a continuous channel of dollar liquidity to support global financial stability.
Precedent for arrangements like the one Pakistan is requesting is thin. A facility for Argentina last year was the first new exchange stabilisation deal with a foreign government since one with Uruguay in 2002, setting aside Mexico’s long-running swap line, which dates to the 1940s and now stands at $9 billion.
A Reserve Cushion Still Under Strain
Pakistan came close to default in 2023 before securing a $3 billion IMF standby arrangement, later following up with the $7 billion Extended Fund Facility now in place. Even so, its reserves remain heavily reliant on official financing, debt rollovers and deposits from allies including China and Saudi Arabia.
That dependence left Pakistan exposed when, in April, it repaid roughly $3.5 billion — about a fifth of its total reserves — to the United Arab Emirates, requiring Saudi Arabia to step in with $3 billion in fresh support to help cover the gap.
The State Bank of Pakistan said in January that it expects reserves to climb back toward their 2021 peak, projecting a total of $20 billion by the end of 2026.
Recasting Ties With Washington
An exchange stabilisation facility from the US would function as both a financial backstop and a political signal, easing strain on reserves and the rupee while reducing Pakistan’s reliance on IMF disbursements and case-by-case rescue packages from its Gulf allies.
The IMF-backed adjustment program has helped stabilise Pakistan’s economy, but at a domestic cost that includes higher taxes, constrained spending and little room for development or welfare initiatives. Fitch Ratings said in April that Pakistan’s compliance with its IMF program has supported the country’s access to funding, and that rebuilt foreign exchange buffers offer some protection against shocks stemming from the conflict in the Middle East.
Fitch also flagged risks ahead, warning that higher energy costs and possible supply disruptions could quickly deplete Pakistan’s foreign exchange reserves.
Foreign investment into Pakistan has stayed limited, held back by a pattern of external financial crises, policy unpredictability, security concerns, previous restrictions on repatriating profits, and a narrow export base. The country’s sovereign credit rating remains firmly in speculative-grade territory, keeping its borrowing costs elevated and its access to international capital markets constrained.
Islamabad has been working to leverage its relationship with the Trump administration to chip away at some of these obstacles, building economic ties that now extend into cryptocurrency, real estate and mining.
Pakistan has signed a stablecoin agreement for cross-border payments with an affiliate of World Liberty Financial, the crypto venture tied to President Donald Trump’s family. It has also pursued a memorandum of understanding with the US government to redevelop the shuttered, PIA-owned Roosevelt Hotel in New York, and has courted American mining investment — including at the Reko Diq copper and gold project, where the US Export-Import Bank has pledged $1.2 billion in financing.
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