Pakistan, China central bank yuan clearing deal to reduce reliance on US dollar – analysts

The Pakistan and Chinese national flags are seen together near the Tiananmen Gate in Beijing on November 1, 2022. Pakistan Prime Minister Shahbaz Sharif is set to arrive in China on November 1 for a two-day visit. (AFP/File)
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Updated 03 November 2022
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Pakistan, China central bank yuan clearing deal to reduce reliance on US dollar – analysts

  • Agreement to boost usage of RMB for transactions between Chinese, Pakistani enterprises and banks
  • Pakistani traders say move to help avoid currency settlement via New York, make products more competitive 

KARACHI: The central banks of China and Pakistan have signed an agreement on establishing RMB (Renminbi) clearing arrangements in Pakistan, a move that would decrease both countries’ reliance on US dollars, analysts and traders said on Thursday. 

The Memorandum of Understanding (MoU) was signed between the People’s Bank of China (PBoC) and the State Bank of Pakistan (SBP) on Wednesday. Governor SBP Jameel Ahmad and Governor PBoC Yi Gang inked the memorandum, the PBOC said. 

“The establishment of the RMB clearing arrangement in Pakistan will further boost usage of RMB for cross-border transactions among Chinese and Pakistani enterprises and financial institutions,” the PBOC said in a statement. 

“This will also promote bilateral trade and investment between the two countries,” the bank added. 

No more details were offered by both sides at the time of the signing. However, Pakistani analysts and traders said the move was meant to reduce reliance on the US dollar. The decision comes at a time when Islamabad faces huge forex reserves depletion as the rupee faces pressure from increasing imports. 

“The development is meant [to bring about] less reliance on the USD (US dollar) and [encourage] more trade in RMB,” Muhammad Sohail, Chief Executive Officer of Topline Securities, told Arab News. Topline Securities is a Karachi-based brokerage firm. 

Pakistani traders said the decision will make bilateral trade between the two countries more competitive and avoid the lengthy process of routing dollar settlements through New York. 

“The major benefit of this agreement would be that Chinese products that will come to Pakistan or the Pakistani products that will go to China will be more competitive due to transactions in our own currencies,” Jawaid Ilyas, Chairman of the Pakistan-China Business Council told Arab News. 

Most dollar base payments and settlements conducted by local banks are cleared in New York for international payments. From there, the currency is sent to the respective bank for its conversion into local currencies. 

At present, the process is a bit complex. Pakistani customers make payments to local banks, who then transfer money to New York where settlements take place. From there, the money flows to the respective Chinese bank where the US dollars are converted into RMB, according to the Pakistani traders. 

“We will be able to avoid this long procedure,” Ilyas explained. “Now, the settlement would be made by both banks, so this is very good for trade.” 

Ilyas said a maximum level of currency swap would be decided by both banks, which they haven’t disclosed. 

The trade between Pakistan and China is heavily tilted in Beijing’s favor, comprising more imports and less exports. 

Overall, exports from Pakistan to China have increased by 2 percent to $2.57 billion during the first nine months of the current calendar year. The bilateral trade volume remained at $20.19 billion with 3 percent growth when compared to the same period in 2021, according to official data shared by China. 


Tirah Valley residents flee homes ahead of Pakistan’s planned anti-militant army offensive

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Tirah Valley residents flee homes ahead of Pakistan’s planned anti-militant army offensive

  • Families flee militant-hit region on days-long journeys amid bitter winter cold
  • Cash aid announced but displaced residents cite lack of evacuation planning

PAINDA CHEENA, Pakistan: In the rugged mountains of Pakistan’s Tirah Valley, long lines of tractor-trolleys and mini-pickups inched toward a registration camp earlier this month. 

The vehicles were stacked with bedding, food supplies and families escaping their homes as a military operation against militants looms in the conflict-striken northwestern region. 

At the Painda Cheena registration point, 60-year-old Hajji Muhammad Yousuf sat wrapped in a shawl, waiting with dozens of others after traveling nearly 40 kilometers from his village in Maidan Tirah, a journey that took four days instead of the usual few hours. He still faces another 66-kilometer trip to Bara, near the northwestern city of Peshawar, the provincial capital of Khyber Pakhtunkhwa. 

Like thousands of others, Yousuf is leaving behind a fully furnished home ahead of an expected security offensive in the volatile border region near Afghanistan.

“Today is our fourth night here,” Yousuf said. “We have left fully furnished houses behind ... There are no facilities, no amenities for us. We are facing great hardships.”

Families load their belongings onto vehicles in Pakistan’s Tirah Valley on January 15, 2026. (AN photo)

Officials say the evacuation could affect up to 20,000 families, marking a significant escalation in Pakistan’s campaign against the proscribed militant group Tehreek-e-Taliban Pakistan (TTP). Despite major military operations in the mid-2010s, Tirah Valley has remained a stronghold for insurgents, prompting authorities to plan what they describe as a targeted clearance.

The scale of displacement has placed acute pressure on limited local infrastructure. While the journey from Maidan Tirah to the registration point at Mandi Kas normally takes around two hours by vehicle, congestion and verification procedures have stretched the trip into days for many families.

“Last night, a woman died of hunger in Sandana,” Yousuf said. “There is no arrangement for medicine, no doctor, no food, no washroom. Women and children are facing problems.”

Displaced residents say they feel trapped between militant threats and state action.

“We ourselves are opposing terrorism, yet we do not understand why, if a Taliban comes in the evening and we give bread, the government comes in the morning asking why the bread was given,” Yousuf said. “In the end, we were forced to do this [to leave].”

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The Khyber Pakhtunkhwa (KP) provincial government has announced a compensation package for displaced families. Talha Rafi, assistant commissioner for Bara, said authorities had set up 15 biometric counters at the registration site.

“One person receives a one-time compensation of Rs255,000 ($911), and a monthly Rs50,000 ($179) is provided,” he said, adding that SIM cards were being issued to ensure digital disbursement of funds.

Families load their belongings onto vehicles in Pakistan’s Tirah Valley on January 15, 2026. (AN photo)

Provincial officials say the payments are intended to cover basic needs during displacement, though residents and tribal elders argue that cash alone cannot offset the absence of shelter, health care and transport arrangements during evacuation.

The evacuation has also exposed tensions between the provincial government and Pakistan’s military establishment over the use of force in the region.

“We have neither allowed the operation nor will we ever allow the operation,” KP Law Minister Aftab Alam Afridi said, arguing that past military campaigns had failed to deliver lasting stability.

“These people are our own people. They are also the people of this state, the people of this province. We will definitely take care of them,” he said, adding that the KP cabinet had approved what he described as “a large package” for the displaced families.

Federal authorities and the military have signaled a firmer stance. While Federal Information Minister Ataullah Tarar and the military’s public relations wing did not respond to requests for comment, military spokesperson Lt. Gen. Ahmed Shareef Chaudhry has previously defended security operations as necessary.

Families sittinng in vehicles with their belongings in Pakistan’s Tirah Valley on January 15, 2026. (AN photo)

In a recent briefing, Chaudhry said security forces carried out 75,175 intelligence-based operations nationwide last year, including more than 14,000 in Khyber Pakhtunkhwa, attributing the surge in violence to what he described as a “politically conducive environment” for militants.

Analysts say political divisions have allowed the TTP to regain ground. 

Peshawar-based journalist Mehmood Jan Babar said many militants now operating in Tirah are local residents who returned after refusing settlement offers in remote parts of Afghanistan.

“Whenever we have seen division at the national level, the Taliban have taken advantage of it,” he said.

But for families waiting in freezing conditions at Painda Cheena, such strategic calculations offer little comfort. Tribal elders accuse civil authorities of ordering displacement without adequate logistical planning.

“The government has, without any administrative arrangements, ordered these people to migrate,” said Muhammad Khan Afridi, an elderly local resident. “You yourselves are seeing what suffering these people are facing, what humiliation they are experiencing.”

As a January 25 evacuation deadline approaches, uncertainty dominates daily life for those uprooted.

“Bringing peace is in the government’s hands,” Yousuf said. “It is up to them whether they normalize the situation or drive us out again tomorrow.”