Pakistan-China financial cooperation to help strengthen Pakistani rupee

China’s steady financial cooperation is one of key reasons behind rise of Pakistan currency in the region, according to a report by Gwadar Pro.

Pakistani currency has recovered 12 rupees against US dollar. The development is helping increase export bill by reducing burden on import bill leading to give strength to the overall economy. Rupee has ascended to its highest level of 155.74 against dollar in one year that is considered a remarkable upturn.

Alarmingly, in the past, Pakistani rupee touched 167.7 against dollar vindicating spiraling depreciation of rupee. However, it regained its lost strength when rupee hovered to 155.74 against dollar, making a difference of 11 rupee despite the economic tumble due to COVID-19 pandemic.

Pakistan currency has breathed well on the back of consistent China’s FDI inflow, Pakistan’s rising exports to China, unshaken financial assistance in CPEC projects and Chinese investors’ avidity in Pakistan’s market that injected a new life to Pakistan’s economy allowing recovery of rupee.

Besides, rupee strengthening is also associated with strong flows of remittances helping the foreign currency reserves stay stable at $ 20.2 billion. As per latest data released by State Bank of Pakistan (SBP), China is a top destination from where the foreign direct investment arrived in Fiscal Year 2021. Chinese investors invested some $ 493 million in Pakistan during July to February of FY 2021.

Last week, China’s $ 60 million investments in textile sector made everybody sit up and take notice during Chinese Ambassador to Pakistan Nong Rong’s visit to Challenge Textile Factory on Lahore-Multan Road. China has added over $ 25 billion in FDI to Pakistan under CPEC, stated by Zhao Lijian, spokesperson of Chinese Foreign Ministry at a news briefing. “Higher foreign remittances and exports receipts support the south Asian currency,” experts say.

In February, workers’ remittances remained above $ 2 billion for the ninth consecutive month. Workers’ remittances amounted to $ 2.266 billion in February 2021, around the same level as the previous month and 24.2 percent higher than that in February 2020, according to the State Bank of Pakistan. Currency analysts say that flow of foreign currencies has improved post COVID-19 pandemic. The central bank’s initiative of Roshan Digital Account (RDA) has seen deposits reaching $ 671 million from over 100 countries. It is estimated that the inflows through RDA are expected to hit $ 1.5 billion by the end of this year.

Economist Slaman Shah said that the State Bank of Pakistan is attracting foreign investments to the country, which is supporting Pakistani rupee against the US dollar. He said that more positive effects are going to be felt soon as progress is insight on the agreement of trading in Chinese currency Renminbi (RMB) against dollar between Pakistan and China. Agreement came when the two countries agreed to do business in Pakistani rupee and Chinese currency Renminbi (RMB) during the visit of Prime Minister Imran Khan to Beijing.