Key facts
- Pakistan has formally requested a $10 billion exchange stabilization facility from the U.S. Treasury.
- The proposed facility aims to increase Pakistan's foreign reserves and support its currency.
- This request is separate from Pakistan's existing $7 billion International Monetary Fund program.
- Exchange stabilization facilities are rare U.S. Treasury backstops used to provide dollars and support financial stability.
- Pakistan has also engaged in economic cooperation with entities linked to the Trump family.
Pakistan has formally requested a $10 billion Bilateral Exchange Stabilization Support Facility from the U.S. Treasury, according to a source briefed on the matter. This move aims to bolster the South Asian nation's foreign reserves and stabilize its currency, thereby reducing its dependence on multilateral financing and ad hoc bilateral support.
The request comes as Pakistan continues to adhere to a $7 billion International Monetary Fund program, which mandates tighter fiscal and monetary policies. The country narrowly avoided a sovereign default in 2023, relying on a $3 billion IMF standby deal and securing a subsequent $7 billion Extended Fund Facility. However, its reserves remain vulnerable to shifts in bilateral support, as seen when it repaid $3.5 billion to the UAE with Saudi Arabia providing $3 billion in fresh support.
Exchange stabilization facilities are infrequent U.S. Treasury backstops designed to provide dollars, swaps, or guarantees to support reserves and steady currencies, distinct from the Federal Reserve's standing swap lines with major central banks. The U.S. Treasury and Pakistan's finance ministry did not immediately comment on the request.
Beyond the IMF program, Pakistan has also sought to leverage its diplomatic engagement, including its role in brokering talks over the Iran war, to foster economic gains. Additionally, the country has pursued economic cooperation with entities linked to President Donald Trump's family, spanning areas such as cryptocurrency stablecoin agreements, real estate redevelopment of the Roosevelt Hotel in New York, and courting U.S. mining investment.