Pakistan China Currency Swap Agreement

In an effort to promote bilateral trade and investment, Pakistan and China signed a bilateral currency exchange agreement worth 10 billion Chinese yuan ($1.58 billion) and 140 billion Pakistani rupees ($1.57 billion) worth three years in December 2011. In an interview with The Express Tribune, Abid Qaiyum Suleri, executive director of the Sustainable Policy Development Institute (SDPI), said that if the agreement was fully implemented, payments for all imports from Pakistan would be made in yuan instead of dollars. (Clarifies that the increase applies to money swaps and not to lines of credit) He expects a similar appreciation of the yuan against the local currency, while the yuan is expected to maintain its international ground. The three-year bilateral currency exchange agreement between the State Bank of Pakistan (SBP) and the Central Bank of the Republic of Turkey (CBRT) amounted to $1 billion in corresponding local currencies. In 2018, the State Bank of Pakistan (SBP) announced an extension of the currency swap agreement under CPEC and the two countries decided to use it for bilateral trade. China today extended the currency swap deal with Pakistan after it was reported that Beijing had granted a billion-dollar loan to Islamabad to avoid a currency crisis. The People`s Bank of China, the country`s central bank, announced today that it has extended a currency swap agreement with the State Bank of Pakistan. The swap has a size of 20 billion yuan (3.1 billion $US) or 351 billion Pakistani rupees, according to a statement from the bank. Both sides believe the extension will facilitate bilateral trade and investment to support economic development in both countries. “This measure will help Pakistan maintain balance of payments pressure and strengthen its local currency,” Zafar Bhutta, an Islamabad-based economist, told Al Arabiya English. Experts have also warned Islamabad of the lows in yuan trade, which has depreciated in recent times.

“The State Bank of Pakistan (SBP) and the People`s Bank of China (PBOC) have agreed to increase the amount of the Chinese Yuan (CNY) currency swap arrangement (CSA) from $10 billion to CNY $20 billion and from Rs165 billion to Rs351 billion,” said an official handout released by the State Bank of Pakistan. Already in 2018, Mehdi Honardoost, then Iran`s ambassador to Pakistan, pointed out that a monetary swap agreement between the two countries was being worked out Pakistan and China had signed the currency swap agreement in 2011 to promote bilateral trade and investment and strengthen financial cooperation. Under the pact, Pakistani importers were allowed to pay for Chinese goods in local currency. “This agreement has been reached,” said an SBP source who spoke on condition of anonymity. . . .

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