Why Pakan is asking the US for a $10-billion lifeline after its Iran diplomacy | World News
From left, US Vice-President JD Vance, Prime Miner of Islamic Republic of Pakan, Shehbaz Sharif and Premierminer of Qatar Mohammed bin Abdulrahman bin Jassim Al Thani, at Lake Lucerne Summit at the Buergenstock resort in Obbuergen, near Lucerne, Switzerland. (File Photo)
Islamabad has approached Washington seeking a $10-billion facility to help stabilise its currency, a source familiar with the matter told Reuters.
The move follows Pakan’s part in mediating talks over the Iran war, which lifted its international standing and fuelled expectations of economic backing from the US and other allies. If the request goes through, it could offer a significant lift to the struggling South Asian economy.
What exactly has Pakan asked for?
Islamabad has asked US Treasury Secretary Scott Bessent for a bilateral exchange stabilisation facility worth $10 billion, to be repaid over as long as five years, according to news agency Reuters.
If agreed, the fund would add to Pakan’s reserves, ease pressure on the rupee, and cut its reliance on loans from bodies such as the International Monetary Fund, even as Pakan sticks to tighter tax and spending rules under its IMF programme, Reuters reported.
The US Treasury declined to comment, and Pakan’s finance minry did not respond outside Asia business hours, according to Reuters.Story continues below this ad
What has Pakan said publicly
Pakan’s Finance Miner, Muhammad Aurangzeb, met Bessent in Washington on Tuesday and raised concerns about how exposed Pakan’s economy is to regional conflicts, Reuters reported, citing a finance minry statement that did not mention the fund request directly.
Delegation staff members meet in the lob on the first day of a quadrilateral meeting between the U.S., Iran, Pakan, and Qatar at the Buergenstock Resort Lake Lucerne, near Stansstad, Switzerland. (Nathan Howard/Pool Photo via AP)
The minry said, “Senator Aurangzeb sought greater US support for Pakan’s road to market, underpinned improved access to international capital markets, higher foreign exchange reserves, and enhanced sovereign credit ratings,” according to Reuters. Both sides also agreed to deepen economic ties and encourage more US investment, the minry said.
How exposed is Pakan’s economy right now?
Pakan remains under a $7 billion IMF programme that has forced unpopular tax rises and spending cuts, Reuters reported. Such stabilisation funds are rare, usually handled through the US Treasury’s Exchange Stabilisation Fund, and differ from the standing dollar swap lines the US Federal Reserve holds with some major central banks, according to Reuters. The last such deal was arranged for Argentina in 2025 the first of its kind since Uruguay in 2002, aside from a long-running Mexican swap line dating back to the 1940s.
Pakan avoided default in 2023 through a $3 billion IMF deal, later securing a $7 billion facility along with a separate $1.3 billion loan for climate resilience, Reuters reported. But its reserves still rely heavily on rollovers and deposits from China and Saudi Arabia, leaving it open to sudden shifts in support, as seen in April when Pakan repaid about $3.5 billion a fifth of its reserves to the UAE, with Saudi Arabia stepping in with $3 billion in fresh help. Story continues below this ad
Pakan’s central bank said in January it expects reserves to reach around $20 billion the end of 2026, close to a 2021 record.
What would a US fund mean for Pakan?
A US-backed fund would work as both a financial cushion and a political signal, easing pressure on the Pakani Rupee (PKR) and reducing Pakan’s dependence on the IMF. Ratings agency Fitch said in April that Pakan’s compliance with its IMF programme has helped its funding position, with rebuilt reserves offering some protection from Middle East-linked shocks, though it warned that rising energy costs and possible supply disruptions could still drain those reserves quickly.
US Vice President JD Vance gestures next to Pakan’s Prime Miner Shehbaz Sharif prior to a quadrilateral meeting between the United States, Iran, Pakan and Qatar at the Burgenstock luxury hotel complex overlooking Lake Lucerne, Switzerland.(Fabrice Coffrini/Keystone via AP)
Foreign investment in Pakan has stayed low, held back recurring crises, policy uncertainty, security risks and a narrow export base, Reuters reported, while its credit rating remains firmly in speculative territory, keeping borrowing costs high.
Pakan has also built economic ties with the Trump adminration through crypto, real estate and mining deals, including a Stablecoin agreement with an affiliate of World Liberty Financial, a crypto venture linked to the Trump family, a plan to redevelop New York’s former Roosevelt Hotel, and $1.25 billion in US financing for the Reko Diq mining project, according to Reuters.
