ISLAMABAD: China’s request to use its renminbi currency (RMB) in the Gwadar Free Zone under China-Pakistan Economic Corridor (CPEC) framework has been rejected by Pakistan.
The country asserted such a move would violate its economic sovereignty, reported Express Tribune. This message was communicated to Chinese authorities during Senior Officials Meeting (SOM) held on Monday in Islamabad.
Issues arose over framework agreement of $2b Karachi Circular Railway (KCR) project, which will be taken up by Planning Minister Ahsan Iqbal with Vice Chairman of National Development and Reform commission on Tuesday during Joint-Cooperation Committee meeting.
Officials said if agreement is reached between two sides regarding KCR, only then will both sides enter into a framework agreement. They said the proposal of using renminbi (RMB) was part of an internationalization process by the Chinese and wanted to avoid currency exchange risks related to use of Pak rupee (PKR) and the US dollar (USD).
State Bank of Pakistan (SBP) and Ministry of Finance (MOF) outright rejected the use of RMB requested by Chinese Authorities. Pakistan and China have agreed all financial arrangements would be carried out under current bilateral Currency Swap Arrangement (CSA).
This CSA is set to expire in December, but both Pakistan and China decided to extend it and enlarge currency swap limit to $500m.
Furthermore, officials shared China wanted Pakistan to accept its request to use RMB currency and make it a part of the final Long-Term Plan (2014-2030) and pressed it again.
As per original LTP draft Pakistan sent to China in March this year, the country agreed to promote construction of Gwadar Free Zone by using model of China (Shanghai) Pilot Free Trade Zone. It was also decided per original LTP draft to pursue RMB offshore financial business in Gwadar Free Zone.
