Cross-currency Pak China trade

Although we were expecting Prime Minister Imran Khan to fetch some billion dollars from the Republic of China as grant or aid, more as cash not as kind. Unfortunately, things didn’t go as planned or more appropriately as government had made us expect from the trip. On top of that, state run news channel added more insult to injury when they tagged the live broadcast from China as “Begging” instead of Beijing. But, the game has just begun, the regime has just started to take off, therefore However, the best outcome is trade in local currencies. The decision was taken in light of increasing dollar pressure on Pakistani Rupee. While reducing dependence on the dollar, the currency swap arrangement (CSA) between the State Bank of Pakistan (SBP) and People’s Bank of China had already been extended for a period of 3 years. In this settlement, the transactions on interest and principle amount shall be in different currencies.

No money in the kitty and the financial deficit proved heavy on the currency, this has worsened the economic situation and devaluation caused uncontrollable price hike. So, this cross-currency trade would ease out the dollar pressure, that’s why we need to give due credit to the government for these strategic moves. While acknowledging the efforts put in by the current government, we must not forget the contribution of Ahsan Iqbal’s contribution for the said proposal. In 2017, Ahsan Iqbal held had shared proposal plan at the time of launch of Long-Term Plan for CPEC 2017-2030. It was decided back then that the transactions that occur in Pakistan will be made through Pakistani Rupee whereas bilateral trade would work on Yuan instead of dollar. This local currency trade option was in the offing back then and it has finally come in the limelight. Now the current government must follow-up with China to implement it in true letter and spirit.