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Turkey-Pak currency swap begins
Publication Date : 05-09-2012
The State Bank of Pakistan (SBP) announced that the currency swap arrangement with Turkey has been implemented from yesterday.
The three-year bilateral Currency Swap Arrangement (CSA) between SBP and the Central Bank of Republic of Turkey (CBRT) amounting to US$1 billion in equivalent local currencies was to be implemented from September.
The SBP has issued necessary instructions to banks for its implementation after due consultations with various stakeholders and completion of operational formalities with CBRT.
A bilateral CSA was signed between SBP and CBRT by SBP governor Yaseen Anwar and CBRT governor Erdem Basci in presence of the Presidents of Pakistan and Turkey in November last year.
The objective of the currency swap is to promote bilateral trade between the two countries in the respective local currencies and any "other" purpose as mutually agreed between the two central banks.
The SBP believes the CSA between the two Central Banks will give a positive signal to the market on the availability of liquidity of other country’s currency in the onshore market. The arrangement will augment the pool of liquidity available to finance bilateral trade between the two countries, supplementing the already available sources of liquidity.
In order to ensure transparency in determination of market interest rates, the State Bank of Pakistan has decided to conduct competitive auctions of Turkish Lira (TRY) Loan Facility.
All commercial banks will be allowed to take FE-25 deposits and extend FE-25 loans in Turkish Lira (TRY) for financing of Imports or Exports in accordance with SBP’s prevailing instructions on FE-25 loans or deposits.
In order to provide TRY funding to scheduled banks, so that they can on-lend the TRY to importers or exporters with underlying Trade documents in TRY, SBP will conduct competitive auctions of Turkish Lira Loan Facility using proceeds drawn under the Currency Swap Arrangement with CBRT.
Participation in auctions will be dependent on the submission of documentary evidence of Export or Import bills denominated in TRY, SBP will conduct "uniform price" competitive TRY auctions in 3 and 6 month tenors. All scheduled banks will be eligible to participate in such auctions.