Islamabad: Pakistan’s Ministry of Commerce said on Friday that the country has passed a special order to allow barter trade with Afghanistan, Iran and Russia for certain goods including petroleum, LNG, coal, wheat, pulses, minerals, metals, and several food items.
The move is seen as another step to release pressures on the dwindling foreign exchange reserves.
According to a statutory regulatory order (SRO) issued by the Ministry of Commerce, the government allowed the import and export of goods under the Business-to-business (B2B) barter trade mechanism 2023, dated June 1, with the three countries.
State and privately owned entities would need approval to participate in the trade mechanism, reports say.
Left with barely enough foreign exchange reserves to cover one month's imports, Pakistan's government is desperately trying to manage a balance of payments crisis and bring inflation under control after it hit a record of nearly 38% last month, reports Reuters.
At a time when the CPI (Consumer Price Index) touched 38 per cent and Sensitive Price Indicator (SPI) based inflation clocked to 48 per cent, Pakistan took a decision to allow barter trade with neighbouring countries, in the wake of the IMF not coming up to rescue the ailing economy of the country.
The government has notified the products to be imported from Afghanistan, which include fruits and nuts, vegetables and pulses, spices, minerals and metals, coal and its products, raw rubber items, raw hides and skins, cotton, and iron and steel.
Sajid Amin, deputy director of the Sustainable Development Policy Institute, said Pakistan could gain particularly from oil and energy imports from Russia and Iran without adding to dollar demand. He added that the barter opportunity is important considering the dollar shortages the countries face, reports Reuters.
"While it may not solve currency smuggling, particularly at the Afghanistan border, it can discourage smuggling of goods from Iran, such as diesel, and Afghanistan which is hurting the economy," Amin added.
From Iran, Pakistani importers are allowed to import fruits, nuts, vegetables, spices, minerals and metals, coal and related products, petroleum crude oil, LNG and LPG, chemical products, fertilisers, articles of plastics and rubber, raw hides and skins, raw wool and articles of iron and steel.
From Russia, Pakistani traders will be allowed to import pulses, wheat, coal and related products, petroleum oils including crude, LNG and LPG, fertilisers, tanning and dying extracts, articles of plastic and rubber, minerals and metals, chemicals products, articles of iron and steel, and items of textile industrial machinery, The News reported.
The Ministry of Commerce, in its statement, said that they held several meetings with high-level delegations of various countries in this regard to make the barter trade system possible.
It was an ideal step taken by the current administration to stabilise the country's economy. It will not only increase foreign reserves of the country but also increase the quantum of trade, it added, The News reported.
Sources said that the barter trade would help overcome banking transactions because, in the case of Iran, there was no possibility of transactions through official channels because of the economic sanction imposed by the US.
Khaqan Najeeb, a former advisor to the Ministry of Finance, said it is hoped the barter trade mechanism would help the economy in the middle of prevailing gaps in Pakistan's import and export potential.
He said regional trade is key to reaching a vast number of people so to facilitate barter trade with the three countries is a good idea.
Last year, Pakistan imported 154,000 bpd of crude oil, little changed from 2021, data from analytics firm Kpler showed, Reuters reported.
In May, the Pakistan Petroleum Dealers Association complained that up to 35% of the diesel sold in Pakistan had been smuggled from Iran. Pakistan's government has also ordered a clampdown on smuggling of flour, wheat, sugar and fertilizer to Afghanistan.
Barter can help discover innovative products, and trading opportunities and can help citizens near border areas to earn a better living, The News reported.
The business community has been advocating proposals aimed at moving forward to operationalise the barter trade arrangement with the three very important countries.
The government has agreed with the business community proposals at a time when the country faces a severe dollar liquidity crunch to pay for important supplies, he concluded.