KARACHI (November 24 2003): Malaysia’s central bank said it has signed an agreement with the State Bank of Pakistan to boost bilateral trade using a gold-backed trading currency.
The accord “represents a commitment for co-operation in the ongoing efforts to develop alternative financing arrangements,” Bank Negara Malaysia said in a statement on its Web site.
This will “facilitate expansion of trade between Malaysia and Pakistan, including modalities to establish a gold-based trade payments arrangement.”
The statement, posted on the website, said "On 21 November 2003, Bank Negara Malaysia signed a Memorandum of Understanding with the State Bank of Pakistan to promote co-operation in the areas of financing bilateral trade and investment flows as well as technical assistance and capacity building in the financial sector.
"The Memorandum of Understanding will cement the co-operation in financial matters. It also represents commitment for co-operation in the ongoing efforts to develop alternative financing arrangements that will facilitate expansion of trade between Malaysia and Pakistan, including modalities to establish a gold-based trade payments arrangement.
“The Memorandum would also pave the way towards enhanced bilateral co-operation between both countries in other related areas of payments arrangement, trade and investment financing.”
Malaysia is pushing a plan by former Prime Minister Mahathir Mohamad to establish a gold-backed trading currency among Muslim countries to wean them from US dollar dependency, protect them against volatile exchange rates and boost trade among them.
Pakistan’s gold reserves rose to Rs 37,033.311 million worth as of June 2003, said the central bank in its Annual Performance Review (APR) for the year 2002-03. The APR says during the year-to-year change between 2002 and 2003 the gold reserves rose by Rs 3,772.065 million.
According to State Bank policy on gold, the reserves including those held with the Bank of India, are stated at the re-valued amounts of the fine content (of gold) thereof in accordance with the requirements of the SBP Act 1956 and SBP general regulations.
The Bank of India holds gold reserves amounting to Rs29.676 million, which were not transferred to Pakistan at the time of partition as assets of undivided India.
Malaysia on September 1, 1998, pegged its ringgit, which had been trading for about 2.50 to the dollar, at 3.80 after it tumbled as low as 4.59.
Gold fell about 15 percent to $274.50 an ounce in that time. Mahathir has since pushed greater links within the Muslim world as a counterweight to US dominance and Malaysia as a model for Islamic development.
Interesting. I dont know the exact implications of this move. But it’ll be interesting when it happens.