- Pakistan’s historic first international payment in Chinese yuan for discounted Russian crude oil marks a significant milestone in the country’s economic relations.
- The move highlights Pakistan’s strategic efforts to diversify its currency reserves and reduce reliance on the US dollar, aligning with global trends of de-dollarization.
- Trading in yuan offers Pakistan benefits such as easing pressure on foreign exchange reserves, mitigating currency risks, and potentially attracting foreign investment in the face of a decline in Western countries’ investments.
Pakistan recently made history by conducting its first international payment in Chinese yuan, marking a significant milestone in the country’s economic relations. The payment was made to Russia against the import of discounted Russian crude oil, and it has garnered attention for the use of the yuan, which is steadily increasing its influence in the international market.
This development showcases Pakistan’s strategic approach to diversifying its currency reserves and reducing reliance on the US dollar.
The decision to import oil from Russia at discounted rates was driven by Pakistan’s need to address the higher prices of oil in the international market and its own fragile economy.
The country’s State Minister for Petroleum, Musadik Malik, confirmed that the payment to Russia was made in yuan. This move has been lauded by analysts and financial experts, who commend China for once again coming to Pakistan’s aid.
Dr. Noor Fatima, an expert in political economy and international relations, acknowledged the significance of this move, stating that it would alleviate the pressure on Pakistan’s foreign exchange reserves and help address its economic crises. She also highlighted the benefits for Russia, as the country redirects its oil sales from Western markets to the East due to the ongoing Ukraine war.
Blinken Undertakes China visit
The strengthening economic ties between Pakistan and China have been instrumental in promoting trade transactions using the Chinese yuan instead of the US dollar. The China-Pakistan Economic Corridor (CPEC), part of China’s ambitious Belt and Road Initiative, has played a pivotal role in deepening this collaboration. Through extensive infrastructural advancements such as roads, railways, and energy pipelines, the CPEC aims to enhance connectivity between China and Pakistan.
Given the significant drop in foreign investment from Western countries, some economists believe that trading in yuan will provide substantial assistance to Pakistan. Shakeel Ramay, a political economist and commentator on international affairs, emphasized that adopting the yuan will help Pakistan find alternative means of payment, easing pressure on its foreign reserves. Moreover, trading in yuan allows Pakistan to avoid unnecessary pressure from organizations such as the Financial Action Task Force (FATF), which has hindered investment in the country.
The international community has witnessed a notable shift towards conducting trade transactions in yuan. This trend reflects China’s growing economic influence and its ambition to position its currency on the international stage. By embracing the yuan for bilateral trade, partner nations mitigate currency risks, diversify trade relationships, and foster closer economic ties with China. China’s efforts to establish offshore yuan centers and expand financial infrastructure have further enhanced accessibility and attractiveness for international traders.
Research indicates that several countries have already engaged in trading yuan, either through bilateral trade agreements or currency swap arrangements with China. Notable examples include Russia, Germany, the United Kingdom, France, Australia, South Korea, Singapore, Brazil, the United Arab Emirates, Saudi Arabia, Malaysia, and Qatar.
Pakistan’s first international payment in yuan is a landmark achievement, demonstrating the country’s commitment to diversifying its currency reserves and reducing dependence on the US dollar. This strategic move, coupled with its strong economic partnership with China, bodes well for Pakistan’s future economic prospects. As the world continues to move toward de-dollarization and de-risking, trading in yuan offers Pakistan the opportunity to navigate these changes successfully and attract much-needed foreign investment.
