CPEC Dynamics; Bilateral Currency Swap Agreement And Balance of Payment of Pakistan

Abstract

The China Pakistan Economic Corridor (CPEC) is considered as principal strategic component of China’s Belt and Road Initiative (BRI). Both countries have signed deals to the tune of $46 billion in 2015. Now these investments and loans call for repatriation of profits and interests which are causing a burden on Pakistan’s, already fragile, Balance of Payments (BoP). This study investigates the impact of China – Pakistan bilateral currency swap agreement (BSA) on Pakistan’s BoP by exploring three similar cases of BSA’s of China with: New Zealand, Mongolia, and Ukraine. Our analysis shows that bilateral trade in all the three cases has felt a strong and positive outcome but China as the foremost winner. Our recommendations suggest how Pakistan could gain the full advantage of the BSA in short, medium, and long-term.