Pakistan Economy: Pakistan seeks $10 billion lifeline – ‘brokerage fee’ after mediation role between US and Iran

File photo: US President Donald Trump with Pakistani Prime Minister Shahbaz Sharif and field marshal Asim Munir

Pakistan has quietly approached the Trump administration for a $10 billion “exchange stabilization facility,” a financial lifeline that would shore up its fragile economy even as it seeks to capitalize on its renewed diplomatic importance in the Middle East.The request, first reported by Reuters, was made directly to US treasury secretary Scott Bessent and envisions a five-year facility designed to strengthen Pakistan’s foreign exchange reserves and ease pressure on its rupee. US sources say the proposal is under consideration and no decision has been made.If approved, the arrangement would be unusual because since 2002 the US Treasury Department has extended comparable exchange stabilization facilities to only two countries – to Argentina more recently and to Uruguay in the past – making Pakistan’s request exceptional in size and strategic significance.The timing reflects Pakistan’s attempt to convert recent diplomatic role into economic gains after it played mediator in facilitating contacts between Washington and Tehran, prompting jibes in Indian quarters about extracting brokerage fee or “hafta” (extortion).For Pakistan, the economic stakes are considerable given the country narrowly avoided sovereign default in 2023 after securing an IMF bailout and emergency assistance from friendly governments.Although the country’s macroeconomic indicators have improved modestly, foreign exchange reserves remain vulnerable, external debt repayments are substantial, and the economy continues to depend heavily on repeated financial infusions from the usual suspects – IMF, China, Saudi Arabia and the United Arab Emirates.Such recurring dependence has long shaped Pakistan’s economic reputation as a country with a begging bowl approach. Since the 1950s, successive governments have relied on foreign aid, multilateral lenders and bilateral bailouts to bridge chronic fiscal and balance-of-payments deficits.Economists have frequently described the country as living “hand to mouth” – meeting immediate financing needs through successive rescue packages while struggling to implement structural reforms that would reduce reliance on external assistance.For the Trump administration, any decision will involve strategic as well as financial calculations, although $ 10 billion is chump change in the overall scheme of things. A stabilization facility could strengthen ties with a nuclear-armed country that in many Indian eyes functions as a “useful idiot.”It could also provide Washington greater leverage at a time when China has emerged as Pakistan’s principal strategic and economic partner through the China-Pakistan Economic Corridor.Critics in Washington, however, are likely to question the wisdom of extending such support to a country that has repeatedly required international bailouts despite decades of foreign assistance.Some lawmakers may also argue that scarce US financial resources should be directed toward domestic priorities rather than another rescue package for Islamabad, with residual doubts and memories of the country harboring and hosting Al Qaeda terrorists.There’s also the personal financial angle given the close ties Pakistan has cultivated with American “crypto bros,” including Trump family and friends.