Key facts
- Pakistan applied for a U.S. foreign currency backstop facility of up to $10 billion.
- The facility aims to strengthen Pakistan's foreign exchange reserves and support the Pakistani rupee.
- The request was made to U.S. Treasury Secretary Scott Bessent for a Bilateral Exchange Stabilisation Support Facility.
- Pakistan's Finance Minister Muhammad Aurangzeb met with Scott Bessent in Washington.
- The facility could have a maturity of up to five years.
- This request follows Pakistan's mediation efforts between the U.S. and Iran.
Pakistan has applied for a U.S. foreign currency backstop facility valued at up to $10 billion to bolster its foreign exchange reserves and provide a cushion against potential shocks. The request was reportedly made to U.S. Treasury Secretary Scott Bessent for a Bilateral Exchange Stabilisation Support Facility, which could have a maturity of up to five years. If approved, the facility would help increase Pakistan's reserves, support the Pakistani rupee, and reduce its reliance on multilateral financing. This development follows Pakistan's recent diplomatic engagement in mediating talks related to the Iran war. Pakistan's Finance Minister Muhammad Aurangzeb met with Bessent in Washington, where he sought greater U.S. support for access to international capital markets and improved sovereign credit ratings. Pakistan is currently under a $7 billion International Monetary Fund program that necessitates politically challenging fiscal and monetary reforms. The country narrowly avoided default in 2023 and has relied on official financing, rollovers, and deposits from countries like China and Saudi Arabia to maintain its reserves. A U.S. facility would offer not only financial support but also a significant political signal from Washington.