This week’s reports from Washington that Pakistan has sought a ‘USD10 billion Exchange Stabilisation Support Facility from the United States’ have generated understandable optimism. If approved, it would represent one of the most significant bilateral financial support arrangements in Pakistan’s history.
Yet, before celebrating another potential inflow of foreign capital, Pakistan must ask a more fundamental question: Will another loan solve the disease, or merely postpone the symptoms?
As correctly worded, ‘An Exchange Stabilisation Support Facility’ is designed to strengthen a country’s foreign exchange reserves, reduce pressure on its currency, and restore confidence in financial markets.
Such mechanisms have existed for decades through the US Treasury’s Exchange Stabilization Fund (ESF), although they have been used sparingly and almost exclusively where American strategic interests were directly involved.
Mexico’s 1995 rescue package, backed by approximately USD20 billion from the ESF, remains the best-known precedent. More limited support has also been extended to countries during periods of severe financial instability, but such interventions have never been acts of charity. They have always reflected a convergence of geopolitical and economic interests. Pakistan is presently on the right side of the USA on both these accounts.
If Pakistan succeeds in securing the requested facility, it should not be mistaken for a grant. Much like an IMF loan, it would almost certainly be a repayable obligation with defined maturities, interest costs, reporting requirements and policy conditions. While, perhaps less intrusive than a traditional IMF programme, it is unrealistic to assume that Washington would provide USD10 billion without expecting policy commitments, transparency, and strategic cooperation in return.
Pakistan’s experience with external borrowing offers sobering lessons. Successive governments have repeatedly treated foreign financing as a substitute for domestic reforms. IMF programmes, bilateral deposits from friendly countries, commercial borrowing, and multilateral assistance have all temporarily strengthened reserves, yet none has fundamentally corrected the structural weaknesses of the economy. Hence one loan after another has become an inevitable phenomenon.
Once the inflows diminish, foreign exchange shortages, fiscal imbalances and debt servicing pressures inevitably re-emerge. This is because Pakistan’s underlying challenge is not merely a shortage of dollars.
It is a chronic inability to generate sufficient export earnings, broaden the tax base, improve public sector efficiency, reduce energy sector losses and attract sustained productive investment.
Borrowing to finance consumption or budget deficits simply postpones adjustment while enlarging the debt burden inherited by future generations.
Public debt already absorbs an alarming proportion of federal revenues through debt servicing alone. Adding another USD10 billion—even on concessional terms—would further increase future repayment obligations unless the funds generate economic returns exceeding their financing costs. That should be the central test of any external borrowing.
If such a facility is approved, and most likely it would be, its deployment should therefore be governed by strict national priorities. It should not finance recurrent government expenditure, politically-motivated subsidies or inefficient state-owned enterprises. Nor should it become another resource captured by entrenched elites while ordinary citizens continue to bear inflation, unemployment and reduced public services.
Instead, every dollar should be linked to measurable improvements in export competitiveness, energy sector restructuring, technology adoption, water security, logistics infrastructure and industrial productivity.
Undoubtedly, these are all tall expectations and most likely not doable; but it is the only way forward to move the country out the debt dilemma.
Equally important are the strategic implications. Pakistan has traditionally sought balanced relations with major global powers. Any large bilateral financial arrangement inevitably raises questions regarding policy independence. While economic cooperation with the United States should be welcomed, financial dependence must never evolve into strategic dependence.
The ultimate objective should be greater economic sovereignty achieved through stronger domestic institutions, not perpetual reliance on external creditors.
The real issue, therefore, is not whether Pakistan should accept a US stabilisation facility - it is whether Pakistan possesses the governance, transparency and reform discipline necessary to convert borrowed money into sustainable national wealth.
For ordinary Pakistanis, another external loan will have value only if it creates jobs, reduce inflation, expands exports, strengthens institutions and reduces future dependence on borrowing.
Otherwise, it risks becoming yet another chapter in the country’s long history of financing today’s problems by mortgaging tomorrow’s opportunities.
The true stabilisation Pakistan needs is not only of its currency, but of its economic governance.
Copyright Business Recorder, 2026
The writer is a former President OICCI; Global Business Leader and Strategic Affairs Analyst