The Pakistani government has apparently introduced a new regulation for processing Iranian imports, requiring payment channels to be verified first. The new law stipulates that only goods paid for via official channels would be eligible for customs clearance. This has surprised customs clearance officers and transportation companies, prompting them to carry out protests in front of the Taftan and Quetta customs offices while demanding a removal of restrictions on import form Iran and a dismantling of the requirements on official payment channels.
Iran is currently a country under sanctions, and it has no formal banking relations with Pakistan. Authorities and government bodies in Islamabad have considered the recent border protests as a strong gesture from customs clearance officers and have decided to temporarily suspend the restrictions for 45 days. Pakistan’s Federal Board of Revenue (FBR) has been instructed to find alternative channels for processing payments related to Iranian imports.
Business community people believe that international financial bodies and Pakistan’s trade partners, particularly Western countries and the United States, have been pressuring Islamabad to reduce the size of its trade with Iran. That comes as Iranian exports to Pakistan, which is currently the 7th largest market for Iranian exports, could be at risk if a permanent solution isn’t found to the current standoff. Official revenue data from both countries have underscored the significance of bilateral trade between the two neighbors as the two have mutually benefited from a booming trade that has significantly contributed to their economic growth.
Pakistan’s new regulations on shipments arriving from Iran has also placed additional strain on Pakistani importers, businesses and manufacturers as they are already facing challenges like high inflation, energy shortage and a complex tax system in the country. These issues have increased production costs, making it more difficult for domestic manufacturers to source ingredients needed to produce various goods. That comes as Iran, a country with abundant natural resources, has become a reliable supplier of raw materials for Pakistan.
Trade between Iran and Pakistan is often settled in local currencies, eliminating any need for use of foreign currencies and the financial systems attached to them.
Economic experts believe that the two neighbors should prioritize the establishment of an official banking channel. This could be accomplished by creating a financial institution, either run by the private sector or government agencies, to facilitate transactions and to offer money transfer services. Such an institution, operating under the supervision of both governments, could connect customs systems at the Iranian and Pakistani borders while it would streamline trade and foster economic growth and will provide both countries with substantial revenues.
Economic Impact of restricting Iranian imports
The impact of restricting Iranian imports could be significant for communities on both sides of the border. In Pakistan, for example, the Taftan customs office earns substantial revenues from collecting import duties and related charges on Iranian goods and commodities. According to recent figures, the office collected PKR 10 billion in import duties over the past fiscal year alone.
Border trade between Iran and Pakistan also supports thousands of jobs. In Pakistan’s Balochistan province, nearly 60% of the population is engaged in the logistics, customs clearance, and import-export practices. In other words, these activities are essential for the economic well-being of communities on both sides of the border.
A ban on Iranian imports would disrupt these businesses and activities and will have serious socioeconomic implications for the communities living in the border regions.
A banking solution for trade transactions between Iran and Pakistan could help prevent these disruptions and will ensure sustained economic growth for border communities of the two countries.
*Hossein Jafari and Seyyed Hassan Zaidi are experts on Indian subcontinent issue based in Tehran.
**Views expressed in this article are the authors’ own and do not reflect those of the Islamic Republic News Agency.
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