BEIJING: For the first time in History Pakistan and China have inked theunprecedented currency swap agreement.
China’s central bank said on Thursday it has signed a three-year bilateralcurrency swap agreement with Pakistan worth 20 billion yuan ($3.13 billion).
The People’s Bank of China (PBOC) said on its website the swap deal woudlhelp bilateral trade and investment.
The two parties believe the extension will facilitate bilateral trade andinvestment to help economic development in the two countries.
Valid for three years, the agreement can be extended upon mutual consent.
A currency swap deal allows two institutions to exchange payments in onecurrency for equivalent amounts in the other to facilitate bilateral tradesettlements and provide liquidity support to financial markets.
In January this year, State Bank of Pakistan released a statement sayingthat public and private sector enterprises may use the yuan for bilateraltrade and investment.
“We encourage market players in both countries to use domestic currencysettlement in bilateral trade and investment and welcome Pakistan’sinitiatives,” said China’s Foreign Ministry Spokesperson Geng Shuang onPakistan’s move.
China believes this will provide a good financial environment for bilateraleconomic, trade and investment cooperation and the construction of theChina-Pakistan Economic Corridor, he added.