ISLAMABAD – Pakistan has reportedly rejected China’s demand to allow its currency to be used in the Gwadar Free Zone under the China-Pakistan Economic Corridor framework, arguing any such move would compromise its ‘economic sovereignty’.
“China wants to introduce its currency in Pakistan as part of its policy to internationalise the renminbi (RMB) – the official name of its currency,” according to the Pakistani officials.
The Chinese authorities wanted to avoid currency exchange risks attached with the use of the US dollar and the Pak rupee.
Pakistan conveyed its final position on the use of the foreign currency in its territory to the Chinese authorities during the Senior Officials Meeting (SOM) in Islamabad on Monday, the Express Tribune reported.
The SOM was held a day before the 7th meeting of the Joint Cooperation Committee (JCC) – the highest decision-making body of CPEC.
The Ministry of Finance and the State Bank of Pakistan opposed the Chinese demand to allow use of RMB.
However, both the sides agreed that all financial arrangements would be made under the existing bilateral Currency Swap Arrangement. The current swap arrangement is going to expire next month and both the countries decided to extend it, in addition to expanding the current swap limit which is equal to $500 million.
“China wants Pakistan to accept its currency demand and make it part of the final draft of the Long-Term Plan (2014-2030),” said the officials, adding, “Pakistan has conveyed its opposition to the demand a few months ago but the Chinese side pressed it again.”
The report quoted from the original LTP draft Pakistani authorities sent to Beijing for vetting earlier this year in March: “Pakistan shall promote the construction of the Gwadar Port Free Zone by drawing on the experience of China (Shanghai) Pilot Free Trade Zone and other Pilot Free Trade Zones in China, and explore RMB offshore financial business in Gwadar Free Zone.”
The signing of the final draft of the LTP by China and Pakistan on Tuesday (today) is still subject to settlement of some pending issues.