Commerce Ministry Formally Starts Barter Trade With Iran and Afghanistan

The government has finally given legal cover to the barter trade with Iran and Afghanistan, according to two notifications issued by the Ministry of Commerce.

Ministry of Commerce has issued SRO.484(I)/2022 and SRO.485(I)/2022 to amend the Export Policy Order (EPO) 2020 and Import Policy Order (IPO) 2020 to formally start barter trade with Iran and Afghanistan.

Through these notifications, Pakistan has cleared a legal mechanism to provide for barter trade with Iran and Afghanistan. According to these notifications, imports and exports shall be allowed under the barter trade arrangement as approved by the Commerce Ministry.

In a past meeting, the Economic Coordination Committee (ECC) of the cabinet took up a commerce ministry’s summary for ‘grant of regulatory support for establishing barter trade arrangements with Afghanistan and Iran’ and, after discussions, “allowed [the] regulatory cover to barter trade arrangements by amending relevant provisions of Export Policy Order (EPO) 2020 and Import Policy Order (IPO) 2020”.

According to the Commerce Ministry, in 2019 a high-powered committee under the chairmanship of the Minister of State for Revenue was constituted to look into the impediments in the way of Pak-Iran bilateral trade. During the 8th JTC, held on July 4-5, 2019, the Iranian side shared a draft barter trade mechanism for consideration and finalization by Pakistan. In light of detailed deliberations involving relevant public and private sector stakeholders, the State Bank of Pakistan submitted a proposal for establishing a barter trade mechanism between Pakistan and Iran as the best viable option.

Subsequently, this Ministry arranged multiple meetings with stakeholders wherein it was decided that Quetta Chamber of Commerce & Industry (QCCI) from the Pakistan side and Zahidan Chamber of Commerce & Industry (ZCCI) from the Iran side would sign an MoU to establish a barter trade mechanism.

The MoU/agreement was finalized in consultation with stakeholders including FBR, SBP, Pakistan’s Mission in Tehran, FPCCI, and QCCI, and finally, the agreement on barter trade between QCCI, Pakistan, and ZCCI, Iran was signed on the sidelines of the 9th session of Pakistan-Iran Joint Trade Committee at Tehran on November 7, 2021.

However, with an aim to improve bilateral trade and transit, Pakistan and Afghan authorities, among other things, have agreed to establish a barter trade mechanism.

The proposed regulatory amendments will cater to barter trade arrangements both with Iran and Afghanistan.

As per minutes of the 9th JTC read with clause iv of the Barter Trade Agreement, the Governments of Pakistan and Iran have undertaken to institute appropriate regulatory measures to allow trade under the barter mechanism. Moreover, both governments have committed to expanding barter trade arrangements by involving other chambers.

As per Para-3 of Export Policy Order (EPO), 2020, exports from Pakistan are generally governed under the Foreign Exchange Regulations of the State Bank of Pakistan (SBP). As such, existing provisions of EPO do not cater to barter trade arrangements, hence, an amendment may be needed to align EPO with the proposed Barter Trade Agreement.

Similarly, under para-3(1) of Import Policy Order (IPO), 2020, imports are allowed against all modes of payment subject to the procedure prescribed by SBP.

In view of the foregoing, the Commerce Ministry has proposed that to provide regulatory cover to barter trade arrangements, relevant provisions of EPO 2020 and IPO 2020 may be amended by adding the following proviso/s thereto: “Provided that exports and imports shall also be allowed under barter trade arrangements as approved by the Ministry of Commerce”.

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