State Bank of Pakistan (SBP) has inked a Currency Swap Agreement (CSA) with People’s Bank of China (BOC). The objective of the agreement is to promote bilateral trade and financing direct investment between China and Pakistan in the respective local currencies.
This was informed by spokesperson SBP while talking to ProPakistani today. State Bank of Pakistan (SBP) has continuously been taking policy measures to ensure that imports, exports and financing transactions with China can be denominated in Chinese Yuan (CNY).
This is SBP’s second agreement with a Chinese bank to facilitate local currency cross-border trade. SBP already allows Industrial and Commercial Bank of China Limited (ICBC) Pakistan to offer similar services since 2015.
Under the agreement, BOC Pakistan will establish a local CNY settlement and clearing setup in Pakistan. BOC can open Yuan (CNY) accounts of the banks operating in Pakistan, to facilitate settlement of Yuan based transactions such as remittance to/from China. BOC can also provide Yuan liquidity to the interbank market for the settlement of Yuan based transactions.
“These steps are part of the efforts by SBP to encourage trade with China in Yuan and eventually in the respective local currencies. This settlement and clearing mechanism is expected to reduce costs and increase efficiency for the local banking system in transacting in Yuans,” the spokesperson said.
The spokesperson further said that currency swaps will enhance market liquidity and facilitate settlement of growing trade and investment transactions between China and Pakistan in Chinese Yuan.