Pakistan to Seek Larger China Swap Line, Expects US Decision on $10B Facility

Pakistan will seek to expand its 30 billion yuan currency swap line with China when it comes up for renewal in 2027 and expects a decision from the United States on a proposed $10 billion exchange stabilization facility within two months, Finance Minister Muhammad Aurangzeb said.

The country remains dependent on external financing to support its foreign exchange reserves and meet debt service obligations, making financial support from partners like China and the U.S., as well as multilateral institutions, critical for economic stability.

Dual-Track Financing Strategy

In a recent interview, Aurangzeb confirmed that the existing 30 billion yuan swap facility from China has been fully drawn. While the government has not yet determined the size of the requested increase, the finance minister said Chinese officials were "open to it" during recent discussions.

"We do plan to make a formal request at the time of the renewal," Aurangzeb stated. Separately, he said a response to Pakistan's request for a $10 billion stabilization facility from Washington is expected within the next two months. The government is also in talks with the U.S. Export-Import Bank (EXIM) and the International Development Finance Corporation (DFC) for further support. Potential uses for U.S. financing include:

• EXIM funds for aircraft purchases from Boeing for the privatized Pakistan International Airlines.
• DFC support for a planned $5 billion program to upgrade the country's oil refineries.

Geopolitical Context and Economic Risks

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When asked about seeking simultaneous support from both the U.S. and China, Aurangzeb described it as an "and-and" discussion, emphasizing Pakistan's strategic relationships with both nations. "China has been a long-standing strategic partner for us... and we have very good... understanding and relationship with the Trump administration," he said.

Aurangzeb also addressed the risk of elevated oil prices stemming from the recent Middle East conflict. He noted that while Pakistan has secured sufficient supplies through October, a prolonged conflict into the later months of the year would be an "area of concern" and could threaten the government's 4% growth target for the fiscal year.

Status of IMF Program

An International Monetary Fund (IMF) mission is scheduled to arrive next week for the fourth review of Pakistan's $7 billion program. The finance minister expressed confidence in the country's position, stating, "we are in good stead with the quantitative benchmarks, and we are largely compliant with the structural benchmarks."

Despite external pressures, Aurangzeb affirmed that the government currently has no plans to seek additional or emergency financing from the IMF, stating that the situation is considered "manageable" for now.