Cash-strapped Pakistan has asked the United States for a USD 10 billion exchange stabilisation facility in exchange for facilitating "failed" Iran peace talks, news agency Reuters reported, citing a source. If approved, it could provide a lifeline for the cash-strapped South Asian economy. The request, which is being reported for the first time, follows Pakistan's role in brokering talks over the Iran war, which raised its diplomatic profile and stirred hopes that it could seek economic gains from Washington and other partners.
In the request to US Treasury Secretary Scott Bessent, Islamabad is seeking a Bilateral Exchange Stabilisation Support Facility between the US and the Pakistani government worth USD 10 billion with a maturity of up to five years. The facility, if agreed to, would bolster Pakistan's reserves, ease pressure on the rupee and reduce its reliance on multilateral financing, even as Islamabad undertakes tighter fiscal and monetary policies in line with its International Monetary Fund program.
Pakistan finance minister meets American counterpart in US
The report came on the same day when Pakistani Finance Minister Muhammad Aurangzeb met with Bessent in Washington and said he had raised the vulnerability of the country's economy to regional geopolitical developments.
"Senator Aurangzeb sought greater US support for Pakistan's road to market, underpinned by improved access to international capital markets, higher foreign exchange reserves, and enhanced sovereign credit ratings," according to the statement released by the Pakistani Finance Ministry. Further, it noted that both sides reaffirmed their commitment to deepening bilateral economic cooperation, promoting greater US investment, and advancing strategic projects.
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Pakistan remains under USD 7 billion IMF discipline that has required politically unpopular tax increases, spending restraint and reforms.
Pakistan's demands aren't rare but a new normal
Exchange stabilisation facilities are rare US Treasury backstops, usually routed via the Exchange Stabilisation Fund, that provide dollars, swaps or guarantees to support reserves and steady currencies. These facilities are different from the permanent standing dollar swap lines that the US Federal Reserve has with some major central banks and act as an international supply line of US dollars to underpin financial stability.
Pakistan economic crisis
Pakistan narrowly avoided default in 2023 with a USD 3 billion IMF standby deal and later secured a USD 7 billion Extended Fund Facility, along with a separate USD 1.3 billion loan to build up its resilience to climate change and natural disasters. But its reserves still depend on official financing, rollovers and deposits from China and Saudi Arabia.
That leaves Islamabad exposed to shifts in bilateral support and IMF disbursement delays. That vulnerability was exposed in April when Pakistan repaid about USD 3.5 billion, one-fifth of its reserves, to the United Arab Emirates, with Saudi Arabia providing USD 3 billion in fresh support. Pakistan's central bank said in January that reserves could return to near their 2021 record, reaching USD 20 billion by the end of 2026.
(With inputs from Reuters)