BEIJING: For the first time in History Pakistan and China have inked the unprecedented currency swap agreement.
China’s central bank said on Thursday it has signed a three-year bilateral currency 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 woudl help bilateral trade and investment.
The two parties believe the extension will facilitate bilateral trade and investment 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 one currency for equivalent amounts in the other to facilitate bilateral trade settlements and provide liquidity support to financial markets.
In January this year, State Bank of Pakistan released a statement saying that public and private sector enterprises may use the yuan for bilateral trade and investment.
“We encourage market players in both countries to use domestic currency settlement in bilateral trade and investment and welcome Pakistan’s initiatives,” said China’s Foreign Ministry Spokesperson Geng Shuang on Pakistan’s move.
China believes this will provide a good financial environment for bilateral economic, trade and investment cooperation and the construction of the China-Pakistan Economic Corridor, he added.