Pakistani SBP extends overall limit of Chinese currency swap agreement

KARACHI, Oc.31 (Gwadar Pro) - Pakistan has extended the currency swap agreement’s overall limit of Chinese Yuan (CNY) from 20,000 million to CNY 30,000 million (around US $4.5 billion) for a period of three years against Pakistani rupees with the maturity buckets of three months to 1 year, the State Bank of Pakistan said on Saturday afternoon.

“During the (financial) year (2020-2021), the overall limit of CNY20,000 million has been further extended to CNY30,000 million for a period of three years against PKR with the maturity buckets of three months to 1 year,” a statement by the SBP read.

Pakistan, it added, paid over Rs 26 billion in interest to China during the fiscal year 2020-21 for using the US $ 4.5 billion trade finance and financial investment under the currency swap agreement.

Pakistan’s SBP and the People’s Bank of China had signed the agreement in 2011 to enhance bilateral trade, investment and serve other financial purposes.

The agreement was renewed in December 2014 for a period of three years with a total limit of CNY 10 billion. It was later extended in 2018 when both sides agreed to increase the amount from CNY 10 billion to CNY 20 billion.

“The State Bank had purchased and utilized CNY 20 billion against PKR (Pakistani Rupee) during the year ended June 30, 2020, with the maturity buckets of three months to 1 year,” said the SBP statement, showing that Pakistan paid Rs 26.1 billion in interest to Chinese bank in FY 2021.

The central bank’s report showed that Pakistan fully used the trade facility by the end of the last fiscal year. “These purchases have been fully utilized by June 30, 2021. Interest is charged on the outstanding balance at agreed rates,” it mentioned.