Pakistan has secured $27 billion in foreign loans during the last fiscal year, with Saudi Arabia and China continuing to provide crucial financial support to the cash-strapped economy. According to a provisional report by the ministry of economic affairs, the country borrowed approximately $26 billion in the previous fiscal year and continued relying on external borrowing to support its economy. The latest funding includes $16 billion through fresh borrowing, while the remainder came from rollovers, grants, commercial financing and investment instruments. Pakistan secured $9 billion in rollovers from its two closest allies during the year, with Saudi Arabia rolling over $5 billion in deposits and China extending rollover support of $4 billion.
Pakistan has formally requested a $10 billion exchange stabilization facility from the United States, according to sources briefed on the matter. As reported by Reuters, the request was made to US Treasury Secretary Scott Bessent and seeks a Bilateral Exchange Stabilization Support Facility with a maturity of up to five years. The facility would provide a lifeline for Pakistan's cash-strapped economy and could bolster the country's reserves while easing pressure on the rupee and reducing reliance on multilateral financing. The request, which is being reported for the first time, follows Pakistan's role in brokering talks over the Iran war, which raised the country's diplomatic profile and created expectations of potential economic gains from Washington and other partners.
The facility request follows Pakistan's role in brokering talks over the Iran war, which raised the country's diplomatic profile and created expectations of potential economic gains from Washington and other partners. According to Reuters, Pakistani Finance Minister Muhammad Aurangzeb met with Bessent in Washington on Tuesday and raised the vulnerability of the country's economy to regional geopolitical developments. The minister sought greater US support for Pakistan's road to market, underpinned by improved access to international capital markets, higher foreign exchange reserves, and enhanced sovereign credit ratings. Pakistan's finance ministry did not immediately respond to Reuters' request for comment outside of Asia business hours, while the US Treasury also did not immediately respond to a request for comment.
The federal government has begun consultations on possible austerity measures in view of the Iran-US conflict, with officials considering a range of cost-cutting steps that could be implemented if tensions between the two countries escalate further. According to government sources, the government is expected to decide on reimposing a number of administrative restrictions as part of its contingency planning. Among the proposals under consideration is a reduction in the number of weekly working days, although no final decision has yet been taken. The government is also considering limiting the number of official vehicles and reducing petrol and diesel consumption by government departments as part of the proposed austerity measures, reflecting growing concerns about economic stability amid geopolitical tensions.
Pakistan remains under $7 billion IMF discipline that has required politically unpopular tax increases, spending restraint and reforms. As reported by Reuters, the country narrowly avoided default in 2023 with a $3 billion IMF standby deal and later secured a $7 billion Extended Fund Facility, along with a separate $1.3 billion loan to build up resilience to climate change and natural disasters. However, Pakistan's reserves still depend on official financing, rollovers and deposits from China and Saudi Arabia, leaving the country exposed to shifts in bilateral support and IMF disbursement delays. That vulnerability got exposed in April when Pakistan repaid about $3.5 billion, one-fifth of its reserves, to the United Arab Emirates, with Saudi Arabia providing $3 billion in fresh support.
