State Bank of Pakistan (SBP) has collaborated with Bank of China by doing a CSA (Currency Swap Agreement). The reason of the agreement is to endorse joint trade and financing direct investment amid Pakistan and China in the particular local currencies.
This was opened by State Bank of Pakistan’s spokesperson. SBP has regularly been initiating policy measures to make sure that exports, imports and transactions of finance with China can be denominated in CNY – Chinese Yuan.
This is State Bank of Pakistan’s 2nd agreement with a bank from China to endorse local currency cross-border trade. State Bank of Pakistan gives permission to Industrial and Commercial Bank of China Limited to give same services from 2015.
Per the agreement, Bank of Punjab will make a native CNY settlement and set up for clearing in the country. Bank of Punjab will be able to facilitate Yuan accounts of the banks working in Pakistan, to help with the currency’s transactions like remittance to and from China. Bank of Punjab may also give Yuan liquidity to the interbank market for the settling of currency-based money happenings.
“These steps are part of the efforts by SBP to encourage trade with China in Yuan and eventually in the respective local currencies. This settlement and clearing mechanism is expected to reduce costs and increase efficiency for the local banking system in transacting in Yuans,” the spokesperson stated.
The representative additionally stated that exchanges of currency will increase the liquidity of the market and help with enhanced trade and investment exchanges between Pakistan and China in Chinese currency.