A day after US president Donald Trump's stinging tweet, the State Bank of Pakistan on Tuesday accorded Chinese Yuan (CNY) "at par with other international currencies such as USD, Euro and JPY etc." as "an approved foreign currency for denominating foreign currency transactions in Pakistan."
"SBP has already put in place the required regulatory framework which facilitates use of CNY in trade and investment transactions such as opening of L/Cs and availing financing facilities in CNY," said a press release from State Bank of Pakistan.
With ties with the US reaching a new low, Pakistan is cosying up to China as the United States seems to be threatening to cut off its funding.
On Monday, Trump tweeted:
The United States has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies & deceit, thinking of our leaders as fools. They give safe haven to the terrorists we hunt in Afghanistan, with little help. No more!
" Donald J. Trump (@realDonaldTrump) January 1, 2018
Indicating deepening economic ties between the two all-weather friends, the State Bank of Pakistan said, "It may be mentioned here that after signing Currency Swap Agreement (CSA) with People's Bank of China (PBoC), SBP had taken a series of steps to promote use of CNY in Pakistan for bilateral trade and investment with China. SBP allowed banks to accept CNY deposits and give CNY Trade loans."
"Considering the recent local and global economic developments, particularly with the growing size of trade and investment with China under CPEC, SBP foresees that CNY denominated trade with China will increase significantly, going forward; and will yield long term benefits for both the countries," the State Bank of Pakistan release said.
Although the move may seem like a knee-jerk reaction to Trump's tweet, a proposal to this effect was being considered in Islamabad for some time.
Minister for Planning and Development Ahsan Iqbal, according to a Dawn report said in December "the government was examining a proposal to replace the US dollar with the Chinese Yuan for trade between China and Pakistan."
Iqbal said this after the formal launch of Long Term Plan (LTP) for the China-Pakistan Economic Corridor (CPEC) 2017-30 signed by the two sides on 21 November.
The CPEC is a flagship project of China's Belt and Road Initiative. The 3,000 km, over $50 billion corridor stretches from Kashgar in western China to Gwadar port in Pakistan on the Arabian sea.
Asked if the Chinese currency could be allowed for use in Pakistan, the minister said the Pakistani currency would be used within the country, but China desired that bilateral trade take place in yuan.
"We are examining the use of yuan instead of the US dollar for trade between the two countries," Iqbal said, adding that the use of yuan was not against the interest of Pakistan.
Rather, it would "benefit" Pakistan, Iqbal added.
With inputs from IANS View More