Pakistan Seeks $10 Billion Financial Facility From US to Bolster Reserves

Pakistan has formally requested a $10 billion exchange stabilization facility from the United States, a move aimed at shoring up its foreign currency reserves and easing pressure on the Pakistani rupee. The request was made to U.S. Treasury Secretary Scott Bessent, Reuters reported on Tuesday, citing a source briefed on the matter.

Details of the Proposal

Islamabad is seeking a Bilateral Exchange Stabilization Support Facility with a maturity of up to five years, according to the report. The primary objectives of the facility are to strengthen the country's reserves, stabilize the national currency, and decrease its dependence on financing from multilateral institutions like the International Monetary Fund (IMF).

The request reportedly follows an increase in Pakistan's diplomatic standing after its involvement in brokering talks related to the Iran war.

Economic Context and IMF Programs

Pakistan's economy is currently navigating a period of tight fiscal and monetary policies under an ongoing IMF program. The country narrowly avoided a sovereign default in 2023 with the help of a $3 billion IMF standby agreement.

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Subsequently, Pakistan secured a $7 billion Extended Fund Facility from the IMF. It also obtained a separate $1.3 billion loan designed to build resilience against climate change and natural disasters.

Reserve Vulnerabilities

Despite recent support, Pakistan's foreign exchange reserves remain heavily reliant on official financing, rollovers, and deposits from allies, particularly China and Saudi Arabia. This dependence leaves Islamabad vulnerable to shifts in bilateral support and potential delays in IMF disbursements.

This vulnerability was highlighted in April when Pakistan repaid approximately $3.5 billion to the United Arab Emirates, a sum equivalent to about one-fifth of its reserves at the time. The repayment was facilitated by $3 billion in fresh financial support from Saudi Arabia.