Pakistan Plans Currency Deals to Reduce Dollar Dependence

In an effort to lessen Pakistan’s dependency on the US dollar and boost commerce with regional economies, the Prime Minister’s Office has issued new directives to complete currency exchange arrangements with the European Union, Russia, and Iran.

The PM’s Delivery Unit is keeping an eye on the planned agreements, which are part of the Ministry of Finance’s strategic reforms agenda, according to an Express Tribune story.

Based on the current currency swap deal between China and Pakistan, the administration is also looking into similar agreements with ASEAN members.

Officials said agreements with Russia and Iran could open new trade avenues, while broader swap arrangements may help reduce pressure on foreign exchange reserves by allowing settlements in local currencies.

Pakistan has benefited from a $4.5 billion trade facility under the current Pak-China agreement; however, the majority of it has been utilized for debt settlement.

According to Finance Minister Muhammad Aurangzeb, Pakistan must return $4.8 billion in external debt this month, including the $1.3 billion Eurobond payment that has already been made.

Additionally, the PM Office has requested that the State Bank of Pakistan and the Finance Ministry endeavor to stabilize the currency market, prevent dollar hoarding, lower the policy rate below 10%, and use the Asian Clearing Union system for trade payments.

According to officials, the government has also been entrusted with supporting medium-term GDP growth targets, reducing the debt-to-GDP ratio, and maintaining the current account deficit below $3 billion.