ISLAMABAD: As the central banks of Pakistan and China have agreed to make Rupee-Yuan clearing arrangements to reduce dependence on US dollar, the All Pakistan Business Forum (APBF) has hailed the decision, saying it would stabilize foreign exchange reserves and strengthen the rupee against the greenback.
APBF President Syed Maaz Mahmood said that the establishment of the RMB clearing arrangement in Pakistan will further boost usage of RMB for cross-border transactions among Chinese and Pakistani enterprises and financial institutions. This will also promote bilateral trade and investment between the two countries, he added. Beijing and Islamabad conducted bilateral trade in Chinese currency worth RMB30 billion in the fiscal year 2020-21 under the currency swap agreement. He said that China increased financing in Chinese currency by an additional RMB10 billion under the CSA during the premier’s visit this week.
Accordingly, Pakistan has now made available a total RMB40 billion to clear its import payments in the current fiscal year 2023, saving $6 billion in foreign reserves.
APBF Chairman Ibrahim Qureshi said that the establishment of an RMB clearing unit in the country means that Pakistan may no longer have to use its precious reserves of US dollars to trade with China. Moreover, when funding China-backed mega projects in the country, China too will not have to rely on sending Pakistan US dollars.
At present, the process is a bit complex. Pakistani customers make payments to local banks, which then transfer money to New York where settlements take place. From there, the money flows to the respective Chinese bank where the US dollars are converted into RMB.
The APBF President said that the trade between Pakistan and China is heavily tilted in Beijing’s favor, comprising more imports and fewer exports. Overall, exports from Pakistan to China have increased by 2 percent to $2.57 billion during the first nine months of the current calendar year. The bilateral trade volume remained at $20.19 billion with 3 percent growth when compared to the same period in 2021.
