'Despite US financing, reforms must continue'

Pakistan's push to convert some of its diplomatic goodwill with the Trump administration into economic support has drawn scepticism from economists, who say fresh financing will do little to address the reforms Islamabad is required to pursue.

During a visit by Finance Minister Muhammad Aurangzeb to Washington this week, he requested a $10 billion US exchange stabilisation fund, according to sources with knowledge of the matter.

Later, Pakistan also pitched a separate trade finance facility with the US Exim Bank, said a source. Both proposals will bolster the rupee and diversify funding beyond the IMF, China and Saudi Arabia. Pakistan recently helped broker a ceasefire between the US and Iran, but its economic fundamentals have remained largely unchanged. It repaid Abu Dhabi $3.5 billion in April, a fifth of the reserves, and turned to a $3 billion Saudi backstop to plug the gap.

While it is unclear whether the US will agree to Pakistan's proposals, some analysts see benefits for Washington, too. The Trump administration has sought a greater role in Pakistan's critical minerals sector, said Uzair Younus, a partner at The Asia Group, adding that the financing is likely to further cement Washington's role in potential mining deals.

However, Oxford University Associate Professor Adeel Malik called the proposed reserve facility a "geopolitical rent," coming after Pakistan's mediation in the US-Israel war on Iran.

IMF-enforced reforms have recently shown some impact. S&P Global Ratings on Wednesday upgraded Pakistan to 'B' from 'B-', its first upgrade in nine years, citing stronger fiscal and institutional settings.

But the $7 billion IMF programme carries a political cost: unpopular tax rises and spending curbs as the government looks towards elections due by 2029. Gareth Leather of Capital Economics said the proposed US fund would provide a "vital cash cushion" for Pakistan's reserves, without the IMF's strict conditions or the constant renewal required for Chinese and Saudi deposits.

The Exim Bank facility, separately, will let Pakistani buyers defer payments to US exporters for one to three years . The real test, however, would not be if fresh money arrives, but whether Pakistan finally delivers on tax, energy and state-owned enterprise reforms, said economist Vaqar Ahmed. Without those, he said, the country would keep returning to the IMF. "Fresh liquidity can buy time, but it cannot buy growth," Ahmed said.