The State Bank of Pakistan on Friday signed 'Currency Swap Arrangement' (CSA) with China to finance bilateral trade in respective local currencies of the two countries. "A landmark bilateral Currency Swap Arrangement (CSA) has been signed between State Bank of Pakistan (SBP) and the People's Bank of China (PBC) in a ceremony held on Friday night in Islamabad by Governor, SBP, Yaseen Anwar and Deputy Governor, PBC, DU Jinfu," the SBP said.
During the last seven weeks, this was the second CSA signed by the SBP, as earlier, on November 1, 2011, a bilateral CSA was signed between State Bank of Pakistan and the central bank of Turkey (CBRT). The bilateral CSA with Turkey was concluded in Pakistan rupee/Turkish lira with size amounting to $1 billion in equivalent local currencies for a tenor of 3 years.
The bilateral CSA with China has been concluded in Chinese yuan (CNY) 10 billion and Pakistan Rs 140 billion for the purpose of promoting bilateral trade and investment and strengthening financial co-operation. This currency swap would also expire in three years, but can be extended with mutual consent. It being expected that bilateral trade and investment would grow between Pakistan and China as a result of this agreement, further augmenting the economic ties of the two countries. This agreement would make a significant contribution in further strengthening the close and special relationship between the two countries.
Announcement of the Currency Swap Agreement between the two central banks will give positive signal to the market on the availability of liquidity of the other country's currency on the onshore market. As a result it will promote bi-lateral trade denominated in Chinese yuan and Pakistan rupee. Economists said that core objective of the Currency Swap Arrangement is to finance bilateral trade in respective local currencies of the two countries.