B2B Barter Trade to manage balance of payment, ease inflation

ISLAMABAD-As the barter trade is set to start with Russia, Afghanistan and Iran, the SAARC Chamber Vice President and the BMP Chairman has observed that the move will exploit the untapped trade potential with these countries, as the government is desperately trying to manage a balance of payments crisis and bring inflation under control, with foreign exchange reserves of just one month’s imports’ cover.
The FPCCI’s Businessmen Panel (BMP) Chairman and the newly-elected Vice President of SAARC CCI Mian Anjum Nisar stated that the barter opportunity is important considering the dollar shortages the country is facing. He pointed out that Pakistan could gain from the barter trade, particularly from oil and energy imports from Russia and Iran without adding to dollar demand.
He appreciated Islamabad as well as other three countries to take serious initiatives to remove hurdles to bilateral trade, asking them to also take benefits of China-Pakistan Economic Corridor projects. In order to meet the objective of barter trade mechanism, all parties must finalise international mechanism to remove difficulties in barter trade, he maintained. He said that barter trade was in fact a right decision, which could boost Pakistan’s foreign exchange reserves through escalation in exports.
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, he added. After Pakistan’s first purchase of discounted Russian oil in April, he told that the country would only be buying crude, not refined products, under the deal.
The government order, called the Business-to-Business (B2B) Barter Trade Mechanism 2023 and dated June 1, lists goods that can be bartered. State and privately owned entities would need approval to participate in the trade mechanism, he said.
He expressed his profound satisfaction that the BMP and FPCCI’s relentless policy advocacy initiatives for the barter trade with Russia, Iran and Afghanistan have borne fruits.
We have pitched barters trade, border markets and currency swap mechanisms very diligently in tens of top-level meetings with the concerned ministries and relevant governmental institutions over the past three-and-a-half years, he added. Mian Anjum Nisar explained that as result of the aforementioned SRO, trade of goods under a Business-to-Business Barter Trade arrangement will be allowed on the principle of import followed by export. Additionally, the export would be allowed to the ceiling of value of imported goods on the basis of the acceptable mechanism provided in the SRO for the concerned exporters. Nonetheless, a Pakistani trader, capitalising on the SRO, will be responsible to equate or net-off value of goods in every quarter i.e. within 90 days after authorisation is granted. He reiterated his longstanding stance that there should be a currency swap mechanism with Russia to stabilise Pak Rupee and opening-up of new avenues of import for many crucial commodities in large quantities, including crude oil. Furthermore, the BMP and FPCCI advocate setting up of large, organised, secure and operational border markets with Iran and Afghanistan to boost regional trade.
He said that the recently launched Mand-Pishin border marketplace and the Gabd-Polan electricity project would serve as a stepping stone for greater economic cooperation between the two countries, expressing the hope that it would unleash development, trade, business and employment opportunities contributing to the prosperity of the people of Gwadar and Balochistan. The FPCCI former president said that the Mand-Pishin border sustenance market is expected to increase trade with Iran, helping local businesses find new opportunities. This is one of the six border markets which will be constructed along the Iranian border. He said that located in the remote village of Balochistan, the marketplace is the first of six to be constructed along the Pakistan-Iran border under a 2012 agreement signed by the two sides.
He said due to lack of banking channels with Iran, some issues were existing in trading with Tehran. The barter trade issue with Iran has now been resolved, which is a welcome step for both Muslim neighbouring nations. He said that the government of Pakistan and government of Iran had decided that a barter trade mechanism will be established, identifying over 50 items for bilateral trade with rice and petroleum products at the top of the list. He said the barter trade could be done via land route through legal customs notified border crossing points without any monetary transaction under the barter trade arrangement.
He said that Pakistan can import liquefied petroleum gas (LPG) from Iran in exchange for rice under a barter arrangement endorsed by the two countries. We will export rice to Iran and import LPG from there, as it is purely a barter deal. It is pertinent to mention that Iran faces sanctions imposed by the United States, making it difficult for global and regional countries to broaden and deepen their trade ties with the administration in Tehran. He also noted the country’s exports had increased, adding that more growth could still be achieved by adopting product and geographical diversification.

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