Quest for a stable currency

The central banks of Pakistan and China have renewed their commitment to expanding their bilateral trade and investment in the Chinese yuan. For that purpose, they signed a memorandum of understanding on establishing yuan clearing arrangements during a recent visit of Prime Minister Shehbaz Sharif to China. According to a senior banker, Yuan clearance enables Pakistan to access Chinese banks and make commercial borrowings easier from them. The financing facility was increased by 10 billion yuan to 40bn yuan or roughly $6bn under the latest currency swap agreement (CSA ) to clear import payments in the current fiscal year. Pakistan imported goods and services worth $18bn last year, of which imports payments worth $4.5bn were paid in Chinese yuan. In FY21, Islamabad made over Rs26bn in interest payments to China by utilising 30bn yuan ($4.5bn). Last year, we exported goods and services worth $2bn to China.