Pakistan on Friday announced a barter trade agreement with Russia, Iran, and Afghanistan in an attempt to ease the mounting pressure on its already depleted foreign reserves, Turkiye’s Anadolu Agency reported on 4 June.
The barter mechanism, in turn, allows crude oil, liquefied natural gas (LNG), liquefied petroleum gas (LPG), wheat, iron, and steel to be imported from Russia, while coal, crude oil, LNG and LPG, and fruits, nuts, and vegetables will be allowed to be imported from Iran.
According to a statement issued by the Ministry of Commerce, the “Business-to-Business (B2B) Barter Trade Mechanism, 2023” came into effect on 1 June, allowing public and private entities to engage in barter trade with all three countries.
“Trade of goods under a B2B BT arrangement shall be allowed on the principle of import followed by export. The export would be made to the extent of the value of imported goods, subject to the tolerance mechanism provided hereinafter for any exigency,” the statement said.
The barter mechanism is necessary for trade with Pakistan’s neighbors, because the US government has imposed economic sanctions on all three. Any Pakistani company engaging in financial transactions with Iran, Russia or Afghanistan would themselves be shut out of the US-dominated global financial system.
US sanctions have complicated economic ties between Iran and Pakistan for years. Pakistan has failed to build its side of a gas pipeline linking to the two countries as a result, and faces a possible $18 billion financial penalty for failing to do so in accord with a previous agreement signed by the two countries.
Pakistani officials initiated the barter mechanism after International Monetary Fund (IMF) officials declined to provide an aid package to relieve the country’s foreign reserve shortage and avoid defaulting on foreign payment obligations.
Andadolu notes that the South Asian country has only $4.09 billion in foreign reserves, enough to cover only a month’s worth of imports.
The agreement comes after Pakistan Prime Minister Shehbaz Sharif met with Iranian President Ebrahim Raisi in May and inaugurated two high-value projects at their countries’ border, including the Polan-Gabd Electricity Transmission Line.
The barter mechanism will facilitate the export of 26 Pakistani products to Russia, Iran, and Afghanistan, including milk, fruits, nuts, and vegetables, rice, salt, pharmaceutical products, leather, textiles, electrical equipment, and sports goods.
Ten items, including fruits and nuts, vegetables, oil seeds, minerals, and metals, can be imported from Afghanistan.
“Imports and exports under the B2B barter trade facility shall be admissible to benefits offered under various concessionary and export facilitation schemes,” the Ministry of Commerce said.
Pakistan is suffering from political uncertainty surrounding recent efforts to convict former prime minister Imran Khan on corruption and graft charges, as well as from a balance of payment crisis, foreign reserves shortages, and increasing difficulty in obtaining financing from foreign credit markets.
Source » thecradle