China today renewed the currency swap agreement with Pakistan after news that Beijing had granted a US$1 billion loan to Islamabad to avoid a currency crisis. The People`s Bank of China, the country`s central bank, said today that it had renewed a monetary sweapage agreement with the State Bank of Pakistan. The swap is estimated at 20 billion yuan ($3.1 billion) or 351 billion Pakistani rupees, according to a statement from the bank. Both sides believe that the extension will facilitate bilateral trade and bilateral investment to support the economic development of both countries. ISLAMABAD, May 24 (Reuters) – China has increased the scope of a foreign exchange swap deal with Pakistan by 10 billion yuan ($1.57 billion), two sources at Pakistan`s central bank said on Thursday, with cash expected to increase quickly dismantled foreign exchange reserves. Suleri said, however, that after the agreement came into force, the yuan would appreciate against the rupees, with the trade balance for China. The agreement is valid for a period of three years and can be renewed by mutual agreement. A currency swap agreement allows two institutions to exchange payments in one currency for equivalent amounts in the other currency to facilitate bilateral trade agreements and provide liquidity support to financial markets, state news agency Xinhua reported today. The decision to put the panda-bond on the market was taken in order to gradually put China`s monetary status on an equal footing with that of the U.S. dollar.
They welcomed the operationalization of the monetary sweaquage agreement and reaffirmed the need to further strengthen cooperation relations between the two countries and the banking sector. “Both sides were pleased to note that Chinese and Pakistani banks are operating in both countries. The two sides have agreed to strengthen cooperation in promoting tourism,” Pakistan`s foreign ministry said in a press release last week. The extension of the foreign exchange agreement came at a time when the government`s dollar reserves (SBP) have fallen to alarming levels of spread. China, Turkey and Russia are already working to explore ways to replace the U.S. dollar in trade with international partners with their respective local currencies. Pakistan is the youngest to join the trio. It expects a similar appreciation of the yuan against the national currency, while the yuan is expected to maintain its ground at international levels. Economists say that the currency swap not only contributes to bilateral trade agreements, but also provides liquidity support for the financial industry. In May 2018, two parties extended the monetary sweapage agreement for another three years to double its size to deepen trade and investment relations, while reducing dependence on the U.S. dollar. In an interview with The Express Tribune, Abid Qaiyum Suleri, executive director of the Institute for Sustainable Policy Development (SDPI), said that if the agreement were fully implemented, payments from all Pakistani imports would be made in yuan rather than dollars.
In December 2011, 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) for three years. “This agreement is finalized,” said an SBP source, who spoke on condition of anonymity. A second source confirmed the agreement and the figures. “The State Bank of Pakistan (SBP) and the People`s Bank of China (PBOC) have agreed to increase the amount of the sweats exchange agreement (CSA) from 10 billion yuan (CNY) to 20 billion CNY and from Rs 165 billion to Rs 351 billion,” said an official statement from the Pakistan State Bank. “This will help Pakistan maintain the pressure on payments and strengthen its national currency,” Islamabad economist Zafar Bhutta told Al Arabiya English. Experts also warned I