Karachi, October 27, 2023 – The State Bank of Pakistan (SBP) has announced that the utilization of the Chinese Renminbi (RMB) for cross-border settlements will bolster bilateral ties between Pakistan and China.
This significant step towards enhancing economic cooperation was highlighted during a ceremony on “Promoting the Use of RMB in Cross-Border Settlement,” hosted by ICBC Bank at the Jinnah Convention Center in Islamabad.
Governor SBP Jameel Ahmad, addressing the gathering, emphasized the deep and enduring economic and financial connections between Pakistan and China. He pointed out that employing RMB for cross-border trade and investment transactions could further fortify these ties. The event also marked ICBC Bank’s designation as the RMB clearing agent in Pakistan by the People’s Bank of China (PBoC).
Governor SBP Jameel Ahmad elaborated on the regulatory framework put in place by the SBP to facilitate the use of RMB in trade and investment transactions, including the opening of Letters of Credit (L/Cs) and accessing financing facilities in RMB. He noted that, in terms of regulations in Pakistan, RMB is now on par with other international currencies like the US Dollar, Euro, and Japanese Yen. Both public and private sector enterprises in Pakistan now have the freedom to choose RMB for their bilateral trade and investment activities.
This strategic shift in currency preference has yielded substantial results. RMB-denominated imports from China to Pakistan have risen from approximately 2% in FY18 to a significant 18% in FY22, thanks to the Central Bank’s proactive efforts to promote the use of RMB in trade with China.
Mr. Ahmad also highlighted the numerous advantages of a local RMB clearing system and denominating trade in RMB. These benefits include a faster turnaround time and reduced costs for the local banking system, easier access to RMB settlement, improved and more competitive pricing for bilateral trade transactions, and the opening of new markets for Pakistani businesses.
Moreover, Governor SBP emphasized that banks can play a crucial role by providing their customers with the necessary information concerning the regulatory framework in China for conducting transactions in RMB. He expressed hope that Pakistani businesses would seize this opportunity to enhance their understanding of the Chinese market and evaluate the benefits of conducting trade in RMB with a more competitive pricing structure.
Governor SBP contended that the establishment of a local RMB clearing system was a strategic initiative that would yield long-term benefits for the China-Pakistan relationship and, in particular, Pakistan’s economy and banking system. He reiterated the SBP’s commitment to providing policy and regulatory support to further strengthen economic and financial ties with China, emphasizing the mutual benefits for consumers and businesses in both nations. This initiative marks a significant step forward in fostering economic collaboration and trade ties between Pakistan and China, further solidifying the bonds of this strategic partnership.
Weekly Inflation in Pakistan Eases as Petroleum Prices Decline
