Pakistan seeks $10bn in US backstop facility to boost reserves

WASHINGTON: Pakistan has asked the United States for a USD 10 billion exchange stabilization facility, according to a source briefed on the matter, which, if approved, 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 Stabilization Support Facility between the US and the Pakistani government worth USD 10 billion with 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 programme.

Pakistan remains under USD 7 billion IMF discipline that has required politically unpopular tax increases, spending restraint and reforms.

Pakistan’s finance ministry did not immediately respond to Reuters request for comment outside of Asia business hours.

The US Treasury declined to comment.

Exchange stabilization facilities are rare US Treasury backstops, usually routed via the Exchange Stabilization 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 acts as an international supply line of US dollars to underpin financial stability.

A 2025 Argentina package was the first new foreign-government exchange stabilization facility operation since Uruguay in 2002, aside from Mexico’s long-standing swap line, dating to the 1940s and now sized at USD 9 billion.

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, and that vulnerability got 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.

Recasting ties with Washington

A US exchange stabilization facility would carry weight as both a liquidity backstop and political signal, easing pressure on reserves and the Pakistani rupee, while reducing the South Asian country’s dependence on IMF tranches and ad hoc rescues.

IMF-backed reforms have stabilised the economy at a political cost, including higher taxes, spending restraint and limited room for development or welfare spending.

Global ratings agency Fitch said in April that Pakistan’s adherence to its IMF programme has supported the country’s funding capacity, while rebuilt foreign exchange buffers provide a cushion against economic shocks from the Middle East conflict.

But deeper constraints remain. Fitch cautioned that rising energy costs and potential supply disruptions could sharply erode the country’s foreign exchange reserves.

Foreign investment in Pakistan has remained thin, deterred by recurring external crises, policy uncertainty, security risks, past profit-repatriation curbs and a narrow export base, while the country’s credit rating remains deep in speculative-grade territory, keeping borrowing costs high and market access limited.

Pakistan has sought to use its ties to the Trump administration to address some of these issues, with economic cooperation that has so far spanned crypto, real estate and mining.

Pakistan has signed a stablecoin agreement for cross-border payments with an affiliate of World Liberty Financial, the main crypto business of President Donald Trump’s family, pursued a memorandum of understanding to redevelop the closed PIA-owned Roosevelt Hotel in New York with the US government, and courted US mining investment, including in Reko Diq, where the US Export-Import Bank has announced USD 1.2 billion in financing.