Loan request follows Pakistan’s war diplomacy against Iran and aims to boost reserves and ease pressure on rupee
Pakistan has asked the United States for a $10 billion currency stabilization facility, according to a source briefed on the matter, which, if approved, could provide a lifeline to the cash-strapped South Asian economy.
The request, reported for the first time, follows Pakistan’s role as a mediator in talks on the Iran war, which raised its diplomatic profile and raised hopes it could seek economic gains from Washington and other partners.
In the request addressed to US Treasury Secretary Scott Bessent, Islamabad seeks a Bilateral Exchange Stabilization Support Fund between the US and the Pakistani government worth $10 billion with a maturity of up to five years.
Read: The prime minister sees a new era in relations with the US.
If agreed, the mechanism would bolster Pakistan’s reserves, ease pressure on the rupee and reduce its dependence on multilateral financing, even as Islamabad adopts tighter fiscal and monetary policies in line with its International Monetary Fund program.
Pakistan remains under $7 billion IMF discipline, which has required politically unpopular tax increases, spending restraints and reforms.
Pakistan’s Finance Ministry did not immediately respond to Reuters’ Request for comment outside of Asian business hours. The US Treasury also did not immediately respond to a request for comment.
Currency stabilization mechanisms are rare US Treasury support mechanisms, usually channeled through the Exchange Stabilization Fund, that provide dollars, swaps or guarantees to support reserves and currency stability.
These facilities are different from the permanent dollar swap lines that the US Federal Reserve has with some major central banks and act as an international supply line for US dollars to underpin financial stability.
An Argentine package for 2025 was the first new operation of a foreign government currency stabilization service since Uruguay in 2002, apart from Mexico’s long-standing swap line, which dates back to the 1940s and is now worth $9 billion.
Pakistan narrowly avoided default in 2023 with a $3 billion reserve agreement with the IMF and subsequently secured a $7 billion expanded IMF facility, but its reserves still depend on official financing, refinancings and deposits from China and Saudi Arabia.
That leaves Islamabad exposed to changes in bilateral support and delays in IMF disbursements, and that vulnerability was exposed in April when Pakistan returned about $3.5 billion, a fifth of its reserves, to the United Arab Emirates, and Saudi Arabia provided $3 billion in new support.
Pakistan’s central bank said in January that reserves could again approach their 2021 record, reaching $20 billion by the end of 2026.
Restructure ties with Washington
A US currency stabilization mechanism would carry weight as a liquidity support and as a political signal, easing pressure on reserves and the Pakistani rupee, while reducing the South Asian country’s dependence on IMF tranches and ad hoc bailouts.
IMF-backed reforms have stabilized the economy at a political cost, including higher taxes, restricted spending, and limited scope for development or social spending.
Global ratings agency Fitch said in April that Pakistan’s adherence to its IMF program has supported the country’s financing capacity, while rebuilt foreign exchange reserves provide a cushion against the economic shocks of the Middle East conflict.
But deeper limitations remain. Fitch warned that rising energy costs and potential supply disruptions could dramatically erode the country’s foreign exchange reserves.
Read: Ties between Pakistan and the United States are based on shared interests and commitment to promote peace: President Zardari
Foreign investment in Pakistan has remained scarce, deterred by recurring external crises, political uncertainty, security risks, past restrictions on profit repatriation and a narrow export base, while the country’s credit rating remains deep in speculative-grade territory, keeping borrowing costs high and market access limited.
Pakistan has sought to use its ties with the Trump administration to address some of these issues, with economic cooperation that has so far spanned cryptocurrencies, real estate and mining.
Pakistan signed a stablecoin deal for cross-border payments with an affiliate of World Liberty Financial, the main cryptocurrency business of President Donald Trump’s family, sought a memorandum of understanding to redevelop the shuttered PIA-owned Roosevelt Hotel in New York with the US government, and courted US mining investments, including in Reko Diq, where the US Export-Import Bank has announced $1.2 billion in financing.
