Pakistan seeks $10 billion US currency lifeline after Iran war mediation role: Report

Pakistan has asked the United States for a $10 billion exchange stabilisation facility as Islamabad seeks to shore up its foreign exchange reserves and ease pressure on its cash-strapped economy, Reuters reported, citing a source familiar with the matter.

The request comes after Pakistan’s role in facilitating talks related to the Iran war raised its diplomatic profile and fuelled expectations in Islamabad that the country could seek economic gains from Washington and other international partners.

According to the report, Pakistan has approached US Treasury Secretary Scott Bessent for a Bilateral Exchange Stabilisation Support Facility worth $10 billion between the US and Pakistani governments. The facility could have a maturity of up to five years.

If approved, the facility could bolster Pakistan’s reserves, support the Pakistani rupee and reduce the country’s dependence on multilateral financing, even as Islamabad continues to implement tough fiscal and monetary reforms under its International Monetary Fund programme.

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Pakistan seeks greater US economic support

Pakistan’s Finance Minister Muhammad Aurangzeb met Bessent in Washington on Tuesday. Pakistan’s finance ministry said Aurangzeb had raised the vulnerability of the country’s economy to regional geopolitical developments.

The ministry did not mention the reported request for a $10 billion facility, as reported by Reuters.

However, it said Aurangzeb sought greater US support for Pakistan’s access to international capital markets, higher foreign exchange reserves and improved sovereign credit ratings.

The two sides also reaffirmed their commitment to deepening bilateral economic cooperation, encouraging greater US investment and advancing strategic projects, the ministry said.

What is an exchange stabilisation facility?

Exchange stabilisation facilities are rare US Treasury-backed mechanisms designed to provide support to foreign exchange reserves and currencies. They can involve dollars, currency swaps or guarantees.

Such facilities are usually routed through the US Treasury’s Exchange Stabilization Fund. They are different from the permanent dollar swap lines maintained by the US Federal Reserve with some major central banks.

A 2025 package for Argentina was the first new foreign-government exchange stabilisation facility operation since Uruguay in 2002, apart from Mexico’s long-standing swap line.

For Pakistan, a US facility would offer more than a liquidity cushion. It would also represent a significant political signal from Washington as Islamabad seeks to deepen economic ties with the Trump administration.

Pakistan remains under $7 billion IMF programme

Pakistan remains under a $7 billion IMF programme that has required politically unpopular tax increases, spending restraint and structural reforms.

The country narrowly avoided a default in 2023 after securing a $3 billion IMF standby arrangement. It later secured a $7 billion Extended Fund Facility, along with a separate $1.3 billion loan aimed at strengthening its resilience to climate change and natural disasters.

Despite improvements in its economic position, Pakistan’s foreign exchange reserves continue to depend heavily on official financing, loan rollovers and deposits from countries including China and Saudi Arabia.

That dependence leaves Islamabad vulnerable to changes in bilateral support and delays in IMF disbursements.

The vulnerability was highlighted in April when Pakistan repaid around $3.5 billion to the United Arab Emirates, equivalent to roughly one-fifth of its reserves. Saudi Arabia subsequently provided $3 billion in fresh support.

Pakistan’s central bank said in January that its reserves could return close to their 2021 record and reach $20 billion by the end of 2026.

Seeking to recast ties with Washington

A US exchange stabilisation facility could ease pressure on Pakistan’s reserves and the rupee while reducing the country’s dependence on IMF tranches and emergency financial support.

IMF-backed reforms have helped stabilise the Pakistani economy but have come at a political cost. Higher taxes and spending restraint have limited the government’s room for development and welfare spending.

Fitch Ratings said in April that Pakistan’s adherence to its IMF programme had supported the country’s funding capacity. It also said rebuilt foreign exchange buffers provided some protection against economic shocks linked to the West Asia conflict.

However, the ratings agency warned that rising energy costs and potential supply disruptions could sharply erode Pakistan’s foreign exchange reserves.

Foreign investment in Pakistan has remained weak, held back by recurring external crises, policy uncertainty, security risks, previous restrictions on profit repatriation and a narrow export base. The country’s credit rating also remains deep in speculative-grade territory, keeping borrowing costs high and access to international markets limited.

Pakistan has increasingly sought to leverage its ties with the Trump administration to deepen economic cooperation in sectors including cryptocurrency, real estate and mining.

It has signed a stablecoin agreement for cross-border payments with an affiliate of World Liberty Financial, a crypto business linked to Trump’s family. Islamabad has also pursued an agreement to redevelop the Pakistan International Airlines-owned Roosevelt Hotel in New York and sought US investment in mining projects.

The US Export-Import Bank has announced $1.25 billion in financing for the Reko Diq mining project.

For Pakistan, the proposed $10 billion facility could become a major test of its emerging relationship with Washington, providing potential financial relief while reflecting the diplomatic leverage Islamabad believes it has gained from its role in Iran war talks.