Pakistan’s balancing act between China and the US

September 18, 2026

Pakistan’s plan to seek a larger currency swap arrangement with China shows how important external financial support remains for the country’s economic stability. The existing swap facility, worth 30 billion yuan, has been fully used. Finance Minister Muhammad Aurangzeb says Pakistan will seek an increase when the agreement comes up for renewal in 2027. The government has not yet decided how much additional financing it will request. Chinese officials, however, have reportedly shown openness to the proposal. Any increase will still have to pass through the required process. At the same time, Pakistan is waiting for a response from the United States on a proposed $10 billion exchange stabilisation facility. A decision is expected within two months. Islamabad is also discussing possible financing with the US Export-Import Bank and the US International Development Finance Corporation. Such financing could support Pakistan International Airlines in buying Boeing aircraft and help fund a planned $5 billion programme to upgrade oil refineries.

There is no inherent contradiction in Pakistan seeking economic cooperation from both China and the US. For a country facing foreign exchange pressures and large debt obligations, maintaining diverse sources of financing is a practical necessity. China remains an important long-term partner, while economic ties with Washington can also provide useful opportunities. The immediate challenge, however, is the rise in global oil prices following the latest conflict in the Middle East. Pakistan has managed the initial pressure and says oil supplies are secured for September and October. Planning for November has begun. A prolonged conflict could create serious pressure on Pakistan’s economy and put the government’s 4 per cent growth target at risk. Yet the decision not to seek emergency IMF assistance at present suggests that Islamabad believes existing arrangements are sufficient.  Pakistan must therefore focus not only on securing external financing but also on reducing its dependence on it.