Islamabad, Jun 6 (EFE).- Pakistan authorized barter trade with Iran, Afghanistan and Russia last week in an attempt to tackle a balance of payments crisis and ease mounting pressure on its already depleted foreign reserves, an official said Tuesday.
Pakistan is grappling with a balance of payments crisis, depleting foreign reserves and rising inflation, which soared to a record 38 percent last month.
Last week, the country’s central bank reported that its foreign currency reserves had fallen to just over $4 billion, barely enough to cover one month’s imports.
According to an official notification issued by the Ministry of Commerce, the country began implementing the “Business-to-Business (B2B) Barter Trade Mechanism, 2023” on Jun.1, thereby allowing public and private entities to engage in trade with all three countries.
Pakistani traders can now export 26 commodities including milk, cream, eggs and cereal, meat and fish products, fruits and vegetables, rice, salt, pharmaceutical products, finished leather and leather apparel, footwear, steel and sports goods to Iranian, Afghan and Russian markets.
In return, they can import crude oil, liquid natural gas, liquid propane gas, chemical products, fertilizers, fruits, wheat, industrial machinery and vegetables from these countries.
A ministry official told EFE that the measure was adopted to ease pressure on the dollar.
“There are lots of issues of doing trade with these countries through banking channels,” added the official on grounds of anonymity.
The official said that the country was facing difficulties in conducting trade with these countries because of international restrictions and financial issues.
He added that barter trade with these countries will continue to expand till such time that those restrictions are lifted.
“Keeping in view the past trade trends, barter trade would stand at $3 billion to $4 billion per annum initially but we expect it to grow further,” the official said.
He described it as a “win-win situation” for al parties involved since Afghanistan, Iran and Russia are also facing international restrictions.
While the notification has been issued, it will take a few days to start trade under the new mechanism, the official said.
Pakistan is expected to receive the first shipment of discounted Russian crude oil in the coming days.
The Russian shipment, which has already docked in Oman on its way to Pakistan, does not fall under the new barter trade agreement, the ministry official said.
Both Islamabad and Moscow have not disclosed details of the crude oil agreement, including how Pakistan will pay Russia, which has been sanctioned by G7 countries because of its war against Ukraine.
Last month, Pakistan and Iran jointly inaugurated the first of the six border markets that both the countries are building to boost bilateral trade.
Iran is also facing sanctions from the US over its nuclear program.
Afghanistan’s Taliban regime has not been accepted by major economies across the world.
Pakistan and Afghanistan conduct trade across the border mostly in cash while using a barter mechanism for certain goods.