Bilateral trade promotion on cards; Pakistan signs currency swap agreement with china

Bilateral trade promotion on cards; Pakistan signs currency swap agreement with china

Islamabad, Saturday, December 24, 2011: In a bid to increase the volume of bilateral trade between the two countries, Pakistan and China signed currency swap agreement today. The agreement marks a crucial development for strengthening
investment and financial relations between the two countries further.

In the meeting held today here, representatives from State Bank of Pakistan Governor Yaseen Anwar and People’s Bank of Chin’s Deputy Governor DU Jinfu singed the currency swap agreements

This is the second currency swap agreement that the government has signed with any country. Earlier, Pakistan and Turkey inked a similar arrangement with an option to trade in each other’s currencies equivalent to $1 billion.

An official handout said the bilateral currency swap arrangement has been concluded in 10 billion Chinese yuan and 140 billion Pakistani rupees. The programme will expire in three years, but can be extended with mutual consent.
Pakistani importers can pay for Chinese goods in local currency.

“We expect that bilateral trade and investment will grow between Pakistan and China as a result of this agreement, further augmenting economic ties between the two countries,” it added. This agreement will contribute significantly
to further strengthening close and special relationship between the two countries.

The currency swap agreement will give a positive signal to the market on availability of the other country’s currency on the onshore market, said the central bank, adding as a result it will promote bilateral trade denominated
in Chinese yuan and Pakistani rupee.

However, industry insiders suspect that China will later convert the arrangement into a loan as it has expressed little interest in trading in Pakistani currency. On the loan, it can charge mark-up at a rate more than the Shanghai
interbank market rate.

The insiders said when Pakistan proposed Beijing to sign the currency swap agreement China refused to deal in Pakistani currency. They said Pakistan had also proposed China to buy its treasury bills with the swap money, but Beijing
refused.

They said Pakistani importers may still have to pay in Chinese currency despite signing of the swap arrangement.

Despite repeated attempts, State Bank officials were not available for comment.

Total volume of bilateral trade was $7.4 billion last year, tilted in favour of China. Pakistan’s exports to China stood at $1.6 billion compared to imports worth $5.8 billion, showing a deficit of $4.2 billion, said the commerce
ministry.

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Posted by Fayyaz Yaseen on Dec 24 2011. Filed under Business, Pakistan. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry