Pakistan requests $10bn US foreign exchange stabilization fund

Pakistan has requested a $10 billion foreign exchange stabilization facility from the United States in an effort to

Pakistan has requested a $10 billion foreign exchange stabilization facility from the United States in an effort to strengthen its economy and improve its external financial position. The proposed facility is expected to help increase the country’s foreign exchange reserves, ease pressure on the Pakistani rupee, and reduce dependence on emergency financial assistance from international lenders.

According to reports, the Pakistani government has submitted a formal proposal to US Treasury Secretary Scott Bessent seeking a five-year bilateral Exchange Stabilization Support Facility. If approved, the financial arrangement could provide Pakistan with greater economic stability at a time when the country continues to face external financing challenges.

The proposed fund is designed to support Pakistan’s foreign exchange reserves, which remain under pressure despite recent improvements in the country’s economic outlook. Stronger reserves would help stabilize the rupee, improve investor confidence, and provide the government with greater flexibility in managing external debt repayments.

The request comes after Pakistan’s reported diplomatic efforts during the Iran conflict. According to the report, Islamabad played a facilitating role in communication between Tehran and Washington. The diplomatic engagement is believed to have enhanced Pakistan’s strategic importance and may have contributed to closer economic discussions with the United States.

If Washington approves the request, Pakistan could reduce its dependence on short-term financial support from multilateral institutions, including the International Monetary Fund (IMF). The facility would also help the country better manage future external financing needs while maintaining stability in the foreign exchange market.

Pakistan is currently implementing wide-ranging economic reforms under the IMF’s $7 billion Extended Fund Facility (EFF). The programme requires the government to increase tax revenues, reduce public spending, improve fiscal discipline, and introduce structural reforms aimed at strengthening the economy.

The country narrowly avoided a sovereign default in 2023 after securing a $3 billion IMF emergency programme. That support was later followed by the approval of the larger $7 billion EFF programme. Although the reforms have improved economic indicators, Pakistan still relies heavily on external borrowing, financial assistance from friendly countries, and the rollover of existing loans to meet its financing requirements.

Economic experts believe that a US-backed stabilization facility would provide a significant boost to Pakistan’s financial position. It could strengthen foreign exchange reserves, support currency stability, improve investor confidence, and reduce the need for repeated emergency borrowing.