Ending reliance on dollar


PAKISTANI companies have been given a green light to use Chinese yuan in trade with Beijing, which would potentially sideline the US dollar currently being used in trade between the two countries. The timing of the move is very significant as it has come at a time when the US has halted economic aid to the country and the rupee is witnessing depreciation against the dollar. Therefore, we understand the trade in domestic currencies will yield long term benefits for both countries and provide a good financial environment for bilateral economic, trade and investment cooperation, and facilitate in financing of key infrastructure projects under China-Pakistan Economic Corridor project.
While Pakistan time and again faces pressure on its foreign exchange reserves, the decision would indeed go a long way in ameliorating its forex deficits. According to State Bank of Pakistan, it has taken policy related measures to ensure that imports, exports and financing transactions can be denominated in the Chinese currency. Under this initiative Pakistani and Chinese bank would be able to open import Letters of Credit in domestic currencies. Moreover, Pakistan would be able to pay for imports from China in Yuan rather than in dollars, and Chinese companies investing in the CPEC projects will be able to bring in Yuan-denominated funds to Pakistan and also remit back their profits and dividends in Yuan instead of dollars or other foreign currencies. It is also important to understand that trade in national currencies protects countries against external influences and helps to avoid risks of fluctuations in exchange rates and to reduce risks and improve efficiency of foreign exchange transactions. It is imperative that the SBP and commercial banks disseminate necessary information to businessmen so that they could carry out their transactions and business activity without any hiccup with China. We understand it is also time for Pakistan to enter into such arrangements with other countries as well in order to end its reliance on dollar. In fact China and Russia are already conducting bilateral trade in their own currencies. By building an alternate system independent of dollar will indeed truly make this world multipolar, free from the pre-eminence of any one particular country.