Pakistan asks China to hike RMB10 billion in currency swap agreement

• Ahsan Iqbal says negotiations on financing for C-5 Nuclear Power Plant underway.
• Pakistan approaches China after utilising RMB30 billion.
• Seeks financing from China for 1,200 MW Chashma-5 power plant.
  

ISLAMABAD: Pakistan has requested China to increase the limit of the currency swap agreement from RMB30 billion to RMB40 billion in order to promote bilateral trade and investment, The News reported on Saturday.

The Pakistan government also sought financing from China for the 1,200 MW Chashma-5 power plant which was agreed upon by countries; however, no progress was made for several years.

Pakistan’s high-powered delegation, led by Minister for Planning Ahsan Iqbal, and comprising Special Assistant to Prime Minister on Finance Tariq Bajwa as well as other officials visited China to hold talks for raising the limit of currency swap agreement by RMB10 billion and restoring financing for the construction of C-5 Nuclear Power Plant.

“Negotiations are underway and Pakistan is expecting a positive outcome soon,” official sources said.

Iqbal, however, refused to share details on the currency swap agreement, saying it was the domain of the finance ministry. However, he said negotiations were underway on financing for C-5 Nuclear Power Plant, adding both sides discussed possibilities to enhance the progress on the China-Pakistan Economic Corridor (CPEC) projects.

The sources said that the request for enhancing the currency swap limit had been made first time during the tenure of former premier Imran Khan but China asked the then government to utilise the existing limit first before making a request to enhance the limit. However, this time, the Pakistani authorities approached China after utilising the RMB30 billion facility.

According to the former governor of the State Bank of Pakistan (SBP), the objectives of the swap are to promote bilateral trade and make direct investments in the local currencies. 

Since the credit support annexe (CSA) is a bilateral financial transaction, all terms and conditions equally apply to both countries, and the pricing is based on standard market benchmarks acceptable in the respective domestic markets.

As per the CSA, the central banks of both countries will have the ability to draw on the swap line at any time during the tenure of the swap. Besides, SBP can purchase the Chinese Yuan against its local currency, and repurchase its local currency with the Chinese Yuan on a predetermined maturity date and exchange rate.