The Prime Minister’s Office has issued formal directives to federal authorities to accelerate the finalization of currency swap agreements with the European Union, Russia, and Iran. This strategic move is part of a comprehensive national plan to diversify trade settlement options, reduce the economy’s heavy reliance on the US dollar, and fortify regional trade connectivity. According to reports, these proposed arrangements are modeled after the successful Pakistan-China currency swap framework, which has already allowed Islamabad to access a 4.5 billion dollar facility. By establishing similar lines with Russia and Iran, the government aims to facilitate smoother cross-border transactions and alleviate the persistent pressure on the nation’s foreign exchange reserves.
This initiative has been integrated into the Ministry of Finance’s strategic reform agenda, with the Prime Minister’s Delivery Unit specifically tasked to monitor the progress of these negotiations. Beyond the immediate regional neighbors, the government is also seeking progress updates on trade settlement discussions with ASEAN countries. The overarching goal is to expand the portfolio of available currencies for international trade, thereby insulating the domestic economy from fluctuations in the global dollar market. This push for alternative settlement mechanisms comes at a time when Pakistan is navigating significant external financing pressures, including a massive 4.8 billion dollar repayment obligation due this month.
In tandem with these trade reforms, the Prime Minister’s Office has tasked the Ministry of Finance and the State Bank of Pakistan to develop a roadmap for reducing the policy rate to below 10%. This effort to lower borrowing costs is intended to stimulate industrial growth while maintaining a delicate balance to ensure stability in the currency markets. To support this stability, authorities have been directed to tighten oversight and launch a crackdown on exchange rate manipulation, hoarding, and the smuggling of foreign currency. The government is also promoting the use of the Asian Clearing Union and planning awareness campaigns to educate the business community on utilizing local currencies and RMB-based trade for international settlements.
Despite these moves toward regional currency independence, Pakistan remains committed to its structural reform agreements with the International Monetary Fund. The government has assured the IMF that it will gradually ease currency controls, including the eventual removal of requirements for commercial banks to surrender dollars to the central bank. These relaxations, along with the easing of restrictions on outward foreign currency movements, will be contingent upon the maintenance of adequate reserve levels. This dual approach aims to satisfy international lenders while simultaneously building a more resilient and autonomous financial infrastructure.
The broader economic framework also sets ambitious long-term targets for Pakistan’s macroeconomic indicators. The government intends to reduce the debt-to-GDP ratio to 61.5% by 2028, significantly lower external debt to 17.9% of GDP, and bring interest payments down to 4.9% of GDP. Officials are working toward keeping the current account deficit below 3 billion dollars with an ultimate move toward a surplus. In terms of growth, the administration is targeting a GDP growth rate of 4 to 5% in the near term, with plans to accelerate this to 6 to 8% by 2029. These targets are designed to scale the national economy to 500 billion dollars, positioning Pakistan as a more formidable economic player on the global stage.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.