Pakistan seeks $10 billion facility from US, submits bid to Treasury Department; here’s why
Facing pressure on external payments, Pakistan has approached the US for a $10 billion facility to bolster its foreign exchange reserves. The move comes as part of moves to boost confidence among international investors, Finance Minister Muhammad Aurangzeb said, according to a PTI report. Pakistan is looking to reduce its reliance on repeated emergency financial support from friendly nations.Pakistan has struggled with external payment pressures for years and came close to default in 2023 before securing timely assistance from the International Monetary Fund (IMF) and bilateral partners.The country is currently implementing a $7 billion IMF programme agreed in 2024, while the government is working to strengthen its credit standing and restore regular access to global capital markets.
Pakistan submits request to US Treasury Department
Aurangzeb said Pakistan had submitted the request to the US Treasury Department and that discussions were ongoing, although no agreement had been finalised. He made the comments in an interview with Business Recorder newspaper published on Thursday, PTI reported.According to the minister, the proposal is intended to reinforce stability in the foreign exchange market and provide reassurance to international capital markets, rather than function as a conventional loan or credit facility.“This is not about a credit line or a loan or whatever. This is a signal about our currency stability, a signal about our foreign exchange stability, and that in turn also allows us that we can go to the market,” he said.The proposed $10 billion Exchange Stabilisation Support Facility from Washington comes as Pakistan attempts to shift away from a financing approach heavily dependent on loans, deposits and repeated rollovers from friendly countries to cover its external funding requirements.Aurangzeb said Pakistan’s “complete effort” was now directed towards moving to market-based financing with longer repayment timelines, instead of relying on short-term bilateral rollovers.“Some will succeed, while with others there might be issues,” he said, adding that the government nevertheless remained committed to reducing its dependence on such financing arrangements.The finance minister said Pakistan continued to appreciate the assistance provided by its bilateral partners over the past decade, especially during the last three years. However, he said the country’s approach to financing was now being reassessed.The government is also engaging with international credit rating agencies to improve Pakistan’s sovereign rating, which Aurangzeb said had remained unchanged since 2003-04.“We want to move at least towards a B+ rating,” Aurangzeb said.According to the minister, a stronger sovereign rating could enable Pakistan to access international markets more easily and potentially at lower borrowing costs, while also allowing it to raise debt with longer maturities.Islamabad is also discussing ways to eventually move away from some of its existing financing arrangements, Aurangzeb said. He added that the government expects to receive feedback from either Exim Bank or the US Treasury by the end of September.Pakistan’s financial fragility has remained a persistent concern, with the country repeatedly depending on the IMF and friendly nations to bridge gaps in external financing and avert the risk of default.
