Pakistan weighs funding options to shore up foreign reserves as payments loom

Pakistan is considering a range of proposals to stabilize its foreign exchange reserves as repayments on Eurobonds and liabilities to the United Arab Emirates put pressure on external accounts, according to official sources.

The government is preparing to secure around $5 billion through alternative funding sources to improve reserves, the sources said.

Islamabad has also approached Saudi Arabia with a request for additional deposits, while seeking to double both the size and duration of the deferred oil payment facility. The request includes increasing the payment volume under the facility and extending the repayment period.

Saudi talks expand beyond deposits

Discussions with Saudi Arabia have also covered the creation of a balance of payments support fund, sources said. Talks are underway to boost Saudi investment in sectors including textiles, tourism, leather, pharmaceuticals and minerals.

Separately, Pakistan has discussed potential Saudi investment of around $2 billion in solar projects, along with possible funding in the railway sector.

Saudi authorities have sought guarantees on investments, but Pakistan cannot provide such assurances during the course of its International Monetary Fund program, according to sources. Negotiations between the two sides are ongoing, though no final agreement has yet been signed.

Reserve targets and IMF conditions

The government aims to ease pressure on the external account while meeting International Monetary Fund conditions that require foreign exchange reserves to reach $18 billion by June.

To meet this target, the central bank has the option to purchase dollars from the market, a strategy it has employed in previous years, sources said.

Pakistan plans to raise reserves further to $18 billion by June and to over $20 billion by December, according to the sources.