Pakistan Seeks US Financing as It Moves To Reduce Reliance on China
[ISLAMABAD] Pakistan is seeking to deepen its economic ties with the United States and reduce its reliance on Chinese state financing as it prepares to return to international capital markets, the Financial Times, a leading UK-based international business newspaper, reported Tuesday, citing Pakistani Finance Minister Muhammad Aurangzeb.
Aurangzeb told the Financial Times that Pakistan’s request for a $10 billion currency swap line from Washington was intended to send a “confidence signal” to private investors as the cash-strapped country works to strengthen its external financing position.
“It’s a combination of engagement with the US primarily to focus on trade and investment flows, and to help signaling with respect to international capital markets,” Aurangzeb told the newspaper.
It is “not an and/or discussion,” he said, confirming that Pakistan is not currently seeking additional financing from China. Aurangzeb stressed that closer economic engagement with Washington did not require Islamabad to choose between the United States and China.
Pakistan has received “constructive engagement” from Washington regarding the proposed facility and expects an answer within the next few months, he said.
The finance minister also pointed to a potentially greater role for the Export-Import Bank of the United States and the US International Development Finance Corporation in financing Pakistani projects, including in the aviation and energy sectors.
Aurangzeb said the government sought to shift Pakistan’s economic model “from aid to trade and investment,” placing greater emphasis on exports to address the country’s persistent balance-of-payments pressures.
Pakistan’s trade deficit widened to $39.5 billion in the fiscal year ending in June, while exports declined, according to the Financial Times.
The move could represent an unprecedented change in Pakistan’s external financing strategy. Islamabad has long depended heavily on Chinese loans and other official financing to support its external accounts.
China remains Pakistan’s largest foreign creditor, holding approximately 23% of the country’s $129.7 billion in outstanding external debt in 2024, according to World Bank data cited by the Financial Times.
Pakistan is seeking to capitalize on improving relations with the Trump administration while carrying out economic reforms under a $7 billion International Monetary Fund program.
Islamabad continues to engage with Beijing on panda bonds, China-Pakistan Economic Corridor projects and other investments. Its current focus, though, is on diversifying its financing sources and reducing its reliance on China while refraining from seeking fresh Chinese financing.