Here come the dollars

HERE we go again. Having succeeded in stabilising the economy and failed at reforming it, the government is not preparing to transition to high growth the old fashioned way: through borrowed dollars procured as a geopolitical rent against services rendered.

A couple of things have happened. Most recently, we have the announcement that Finance Minister Muhammad Aurangzeb met the US treasury secretary and ‘asked’ for a $10 billion swap line from the Exchange Stabilisation Fund, the same fund from where the Trump administration gave a $20bn swap line to Argentina in October last year. Argentina drew $2.5bn from the fund for a few weeks then zeroed it down by December, and has made no further drawings from it since.

In April, President Donald Trump announced that they were in talks with the UAE for a similar facility, and that a number of other Asian countries had approached the US with requests for the same. That is when word first began to circulate that Pakistan may be among those Asian countries. Now that word has been confirmed.

On other fronts, the government is building a powerful borrowing capacity with the purpose of pulling large quantities of dollars into the system with which to kick-start a growth process. In April, for example, when the UAE called in their deposits of $3.4bn with the State Bank, the funds were returned to them and within weeks $3bn were deposited by Saudi Arabia in the finance ministry. This was an interesting procedure. The outflow to the UAE reduced the State Bank’s foreign liabilities and predetermined drains by $3.4bn, causing the net reserves of the central bank to rise by that amount. But the new borrowing from Saudi Arabia did not come on the State Bank’s liabilities, because it was extended to the finance ministry. The result was a sharp drop in State Bank liabilities and no corresponding decrease in reserves. Then in May, these liabilities dropped by another $2bn. It is hard to find a two-month period in our recent history when State Bank liabilities fell by $8bn in two months.

The movements are now unmistakable. The preparation for bringing in large quantities of dollars are underway.

This creates room for more borrowing because borrowers look at your predetermined outflows over the next 12 months and decide your credit worthiness. On cue, the government announced the creation of a consortium of international banks “for its Global Medium-Term Note” and the first rating action on the back of the improved external sector numbers came from Standard & Poor’s which upgraded its credit rating for Pakistan up to B from B negative, where it had stood for nine years.

Then came confirmation from the government that they were in talks with Saudi Arabia for another $6.7bn oil facility at one per cent interest for 15 years. Coupled with this, some news channels reported that another request for additional deposits had also been made though there is no confirmation on this yet. To top it off, word also suggests that forthcoming maturities of Saudi deposits could see rollovers on longer tenors, beyond the standard one year, which would also put them out of the 12-month window of predetermined drains. These are not yet confirmed though.

From the looks of it, they are preparing to pump growth using borrowed dollars and we are not even near the end of these announcements. In the remaining months of 2026, there will be more such announcements. The war dividend, or perhaps the peace dividend depending on your preference, is now beginning to take shape before us. It is still early days and much could go wrong, or turn out to not be what we thought it was. The swap facility with the US Treasury, for example, may not even be drawn down (just as Argentina did not draw it down after a small drawing in October which they quickly replenished). Pakistan has had other such swap lines, notably one from the People’s Bank of China, which dates back to 2013 and has been extensively utilised since then, so our recourse to such a financing line may be different from that of Argentina.

But the movements are now unmistakable. The preparation for bringing in large quantities of dollars are underway. The inflows will be from various channels, and perhaps even favourable tariff treatment for Pakistani exports versus those of its competitors, in American markets. Some are asking whether this increases Pakistan’s exposure to geopolitical risks, and even reopens the door to the bad old days when the country was routinely lectured to ‘do more’. But it seems somewhere up there a decision has been made, that this is a headache they are willing to take on in return for tens of billions of dollars.

If this analysis proves correct then this moment will be an important turning point in this government’s fortunes. Nothing changes the mood of a country like economic growth. Nothing gets people more focused on their work than the proliferation of moneymaking opportunities. Nothing breaks the fever of political gloom like a consumption binge. That is what the Pervez Musharraf regime learned by accident. It is what these people are pursuing as conscious strategy.

So if this turns out to be true, FY26 could be the year when the economy turned. There will be nothing sustainable about it, of course, and it will crash just like every other growth spurt did in the past. The greater danger here might be that Pakistan could end up being pushed to do things that create lasting bad blood with Iran. But nothing quite lands to applause like a consumption binge dressed up as economic growth. It sure feels good while it lasts! And one thing we all know about human nature is that people like to feel good and nobody likes a naysayer in good times.

So buckle up and keep your eyes out for where the moneymaking opportunities are lurking. If it’s true that good times are coming, early positioning makes for a winner.

The writer is a business and economy journalist.

khurram.husain@gmail.com

X: @khurramhusain

Published in Dawn, July 23rd, 2026 ...