Currency Swap Deal Between China and Pakistan Extends

China and PakistanThe currency swap deal between China and Pakistan has been extended for additional three years. The agreement was signed between the nations in the year 2011, and the extension is kind of blessing for Pakistan. It is so because the country is in economic turmoil with low levels of dollars in its reserve.

To help with the financial crisis, Beijing has given a loan of $1 billion to Pakistan to solve its dollar reserve problem.

The Central Bank of China held a press conference recently where it talked about the extension of 3 years for currency deal with State Bank of Pakistan.

At the moment, the size of the currency swap is at 20 Billion Yuan which is equivalent to US$ 3.1 Billion on the side of China while Pakistan would exchange 351 Billion Pakistani Rupees.

Both the countries are of the opinion that the extension of the currency swap deal is going to strengthen their economy with better bilateral trade between them. Right now the agreement is extended for three years which can get a further extension if both the countries have a deal. A currency swap deal is a kind of compromise where both the nations agree to exchange their national currencies with one another. This helps in encouraging better trade deals with sound liquidity in the financial market.

Tariq Bajwa who is the Governor of State Bank of Pakistan in a statement said the currency deal will undoubtedly strengthen the political, financial and military ties between the nations and will improve liquidity to a great extent.

Al Jazeera English

Pakistan Requires Forex Boost

Earlier this month, the foreign reserve crisis of Pakistan received a lot of attention. In April 2017, the country had foreign exchange reserves to the tune of $18.1 Billion, but over the months, it deteriorated and had come down to $10.8 billion. The foreign reserves could support only two months of import, and that is why the deal from China is so crucial. It helps Pakistan to avail $12 billion annually from China through imports.

With a loan of $1 billion from China, Pakistan need not have to worry anymore and seek financial help from the International Monetary Fund (IMF). This move from China would help the country to hold a strong influence in the region. Additional details of the loan are not made public as it is a part of China Pakistan Economic Cooperation Project or CPEC.

It is to be noted this is not the first time that Pakistan has borrowed from China. In the past, Pakistan has availed a loan of $1.2 billion from China with every possibility of the additional credit shortly.

With $1 billion loans and extension of the currency swap deal, Pakistan is in a better position with very less dependence on dollar something which China always prefer.

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