Pakistan and Turkey are likely to implement the already signed currency swap agreement, in next two months after the Ministry of Commerce started the awareness drive for businessmen. The agreement, signed in November 2011 between the central banks of the two countries, would be implemented by August 2012 as State Bank of Pakistan is working on the arrangements.
The BP and the Central Bank of Turkey, for the first time, had reached a $1 billion currency swap arrangement in Istanbul during a visit of President Asif Ali Zardari in November last year. Talking to Business Recorder after a meeting on 'Creating Awareness About Currency Swap Arrangements' organised by the ministry and Trade Development Authority of Pakistan (TDAP) held here at the TDAP office on Monday, Tariq Puri, Chief Executive of the authority said the awareness move was initiated to discuss the new trade mechanism with local businessmen.
As the Prime Minister has directed the concerned authorities to speed up the process to implement the new way of trade, the ministry and the TDAP have organised meeting with business representatives to examine whether the currency swap will support the bilateral trade or not.
The awareness about the ongoing efforts of the government for having currency swap arrangements, especially with regional countries, was needed before going into the implementation process of the new system. The SBP representative informed the meeting that the entire process would take at least two months, he added.
Puri was expecting that under the new arrangement trade with the foreign country would be enhanced in near future. The bilateral trade was already in favor of Pakistan that out of the total trade of $1.3 billion the country's share was around $1.083 billion. According to Puri, Turkey is one of the important trading partners of Pakistan in the region and the close brotherly ties between the two countries need to be leveraged through swap arrangements.
According to sources, M Ali Malik, Director State Bank briefed the participants about the current mechanism of CSA with Turkey saying it would be based on borrowing and lending arrangements between the central banks of the two countries. The lenders will further be extended to the scheduled banks which will provide necessary financing to traders in the two countries. The above arrangement was necessitated because there was no liquidity available with the two countries in terms of the local currencies and neither was such deposit base available.
According to the State Bank official, the arrangement will help boost trade between the two countries as the same would not be constrained by shortage of foreign exchange (ie dollar and other hard currencies). It will also reduce dependence on the dollar, which would reduce, indirectly, the pressure on foreign exchange reserves.
According to sources, the CSA was concluded last year in PKR and Turkish lira with a size amounting to $1 billion in equivalent of local currencies while the core objective of the arrangement, which will be for three years, was to finance bilateral trade in local currencies.
Zafar Mahmood, Secretary Commerce, who also attended the meeting briefed the participants about the effective utilization of the currency swap agreement signed by the two countries. The trade representatives included S Usman Ali of Silver Textile, Shehzad Salim from Prgmea, Mirza Ikhtiar Baig, Chairman Pak Denim; Irfan Sheikh, ex-Chairman Reap; PCF, PTA and others.
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