Pakistan has passed a special order to allow barter trade with Afghanistan, Iran and Russia for certain goods, including petroleum and natural gas, the Ministry of Commerce said on Friday.
According to a Reuters report, the country is 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.
"In some cases, it is not in our interest because we export minerals and our exports are rising; we have to buy goods from them to make up the difference in our exports. After all, in exchange for our exports, they give us goods, not money like Euros and Dollars,” said Azerakhsh Hafezi, an Afghan economist.
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.
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.
"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.
In the meantime, the Islamic Emirate's Ministry of Industry and Commerce stated that it has spoken with Pakistan's government about the Business-to-Business Barter Trade Mechanism, but that nothing has been decided yet.
"Meetings have been held with Pakistan regarding Business-to-Business Barter Trade, and we are talking about the details, but these meetings have not been finalized yet," said Akhundzada Abdul Salam Javad, a spokesman for the ministry.
According to the Chamber of Industry and Commerce, due to banking problems barter trade will benefit the country.
"In the current situation where we are in a state of sanctions and we do not have a free hand in the transfer of money transactions, it is not so much to our disadvantage, but to our benefit; but one thing must be observed, that is, the Afghan currency does not come under the influence of Kaldar,” said Khanjan Alikozai, a member of the ACCI.
"Since this is a regional contract, it includes Russia and one of our major trading partners, Iran, and it's possible that other countries will participate in this, so we have a positive view in this regard and that the Islamic Emirate participates in this business with regard to national interests," said Naqibullah Safi, CEO of the Afghanistan-Pakistan Joint Chamber of Commerce.
Pakistan is one of Afghanistan's main economic partners; the majority of Afghan products are traditionally sold in Pakistani marketplaces, and Pakistan also exports commodities from Afghanistan to other nations.