The State Bank of Pakistan (SBP) has not opened any formal banking channels with Iranian and Russian markets due to which their potential cannot be tapped, says the Pakistan Business Forum (PBF).
PBF Vice President Ahmad Jawad said, “The SBP should facilitate exporters, especially for the Iranian and Russian markets, by issuing timely e-forms and making special arrangements for banking channels,” The Express Tribune reported.
“The Iranian market can absorb between 60,000 to 80,000 tons of kinnow a year, while the size of the Russian-Ukrainian-Belarus market (the largest citrus importer in the world) for the Pakistani citrus fruit can be doubled within no time from the present 50,000 tons provided the government establishes formal banking links,” observed Jawad.
Given 50% lower production of the fruit, due to acute canal water scarcity and unexpectedly higher temperatures during the flowering stage of the plants, the price of oranges may rise this winter, warned the PBF official.
According to a notification from the district administration, “Kinnow exports will resume from the first week of December, but due to low production, the farm price will be Rs 2,000 per mound.”
Due to various US/international sanctions imposed on Iran, Pakistani banks have been reluctant in opening letters of credit for export to Iran despite the repeated appeal on the part of exporters and traders of the country.
Absence of a credible payment mechanism remains the major irritant in the way of Pakistan-Iran trade. International sanctions, particularly those imposed by the US and European Union in 2010.
The sanctions prevented Pakistani banks from doing business with their Iranian counterparts, including the opening of LCs, which is the most credible method for carrying out international trade transactions. Trade was conducted through alternative payment mechanisms of limited scope, such as cash and to a certain extent through barter.
Call for Barter Trade
In related news, Gholamhossein Shafei, head of the Iran Chamber of Commerce, Industries, Mines, and Agriculture (ICCIMA) on Saturday called for Iran and Pakistan to enter into barter deals in a meeting with Pakistani Consul General to Mashhad Muhammad Sheryar Khan.
Iranian and Pakistani economies are complementary and there is significant potential which can boost bilateral transactions, the ICCIMA website quoted Shafei as saying in Tehran.
He said the government in Tehran is currently concentrating on preferential tariff and then moving towards free trade, although “there are hurdles in this regard that are negatively impacting trade between the countries.”
Iran’s Cabinet recently gave the go-ahead to the Industries, Mining and Trade Ministry to negotiate, revise and sign a temporary free trade agreement with Pakistan.
Sheryar Khan said that both Iran and Pakistan should focus on enhancing bilateral economic and trade relations. The Pakistani consulate general in Mashhad is prepared to help, he said.
Bilateral Trade
Iran’s exports to Pakistan reached 1.6 million tons worth $704 million in first seven months of the fiscal year that started in late March, the spokesman of the Islamic Republic of Iran Customs Administration, Morteza Emadi, said.
Liquefied petroleum gas, hydrocarbon gas liquids, bitumen, milk powder, liquefied natural gas and liquefied butane were the main exports
Iran’s imports from Pakistan hit 512,000 tons worth $563 million during the same period. Rice, mango, sesame seeds and banana were the main imports.
Total two-way trade reached $1.26 billion during the period, with Iran posting almost $141 million surplus.
