The aftermath of the Pahalgam terror attack (Pahalgam Terror Attack) has illuminated the tensions (India-Pakistan Tension) between neighboring countries India and Pakistan. Once again, Pakistan is reaching out to its ally nations for help. As reports confirm, Pakistan has pleaded with China to escalate its current swap line by 10 billion yuan. As a consequence of the terror attack and India's subsequent actions, Pakistan is presenting this request.
Finance Minister Aurangzeb Reveals Plan
According to Reuters, Pakistan's Finance Minister Muhammad Aurangzeb disclosed in an interview that Pakistan has asked China to augment its current swap line by 10 billion yuan. During the interview in Washington, the Finance Minister also mentioned plans to launch the Panda Bond by the end of 2025.
Current Swap Line Status
Aurangzeb explained that Pakistan's existing swap line stands at 30 billion yuan, with the objective to increase it to 40 billion yuan. A 10 billion yuan increment (approximately 1.4 billion dollars or 11,951 crores INR) would signify an improved financial position. This amount translates to around 39,333 crore PKR in Pakistani currency. It is important to note that 'swap line' agreements are contracts between central banks of countries to exchange their currencies to provide foreign currency liquidity. The Chinese Central Bank is promoting currency swap lines with emerging economies like Argentina and Sri Lanka.
A currency swap line is an agreement between two countries' central banks to exchange their currencies, providing liquidity to each other in foreign currency. This arrangement can be useful during financial crises or stress by stabilizing markets, ensuring banks that specific currency pressures are minimized. Swap lines maintain large cash reserves.
Source: aajtak
'Panda Bond to Launch by Year-End...'
Along with the request to enhance the swap line, Pakistan's Finance Minister Aurangzeb expressed optimism about launching the Panda Bond (Panda Bond) before year-end. He stated that Pakistan aims to diversify its debt base and has made notable progress in this direction. A Panda Bond is a debt instrument denominated in Chinese Yuan (RMB) issued in China's domestic bond market by foreign entities like companies, governments, or financial institutions.
Simply put, Panda Bonds offer foreign entities a chance to obtain loans in yuan within China. Named 'Panda' due to its status as China's national symbol, these bonds enable foreign companies to tap into China's capital market.
Stance on the Pahalgam Attack
During the interview, when asked about the Pahalgam terror attack (Pahalgam Terror Attack) involving tourist casualties and the subsequent economic impact of increased tensions with India, Aurangzeb remarked that the attack led India to accuse Pakistan of funding and instigating terrorism in Kashmir—a region claimed by both countries and over which two wars have been fought.
Post this incident, both nations enacted measures, with Pakistan closing its airspace to Indian airlines and suspending trade relationships, while India suspended the 1960 Indus Water Treaty (Indus Water Treaty) and closed the Attari border. Aurangzeb noted that previous diplomatic tensions had already diminished bilateral trade to merely 1.2 billion dollars last year.
