Friday, September 29, 2023

Goods for goods | why did Pakistan have to adopt the centuries old trade method?

For goods for goods, why did Pakistan have to adopt the centuries-old trade method?
Pakistan will no longer need dollars to trade with these countries.

Pakistan’s Ministry ( of Commerce had on June 1 issued a formal notification approving “goods for goods” trade with Afghanistan, Iran and Russia under the centuries-old barter system.

Under this barter trade system, Pakistan will be able to export 26 types of commodities to Afghanistan, Iran and Russia, as well as import other commodities including gas, petroleum products and coal from the three countries without payment in dollars.

The centuries-old mechanism has allowed trade with the three countries at a time when Pakistan is facing a severe shortage of foreign exchange and is also seeking to restore its bailout package with the International Monetary Fund (IMF). There is a challenge.

Who will be able to trade under the barter system?
Under the government’s barter policy, those public and private commercial enterprises can trade goods for goods, which are registered with the Federal Board of Revenue as active taxpayers and have also availed the facility of Pakistan Single Window System.

Similarly, persons who have a valid import and export trade agreement through the customs authorities can also benefit from this new policy.

Will there be a difference in prices and the number of goods?
Goods-for-goods trade will be permitted on the principle of “import followed by export” and the value of the imported goods will be equal to that of the exported goods.

The Ministry of Commerce in its declaration has listed 26 types of commodities that can be exported to Iran, Afghanistan and Russia through barter trade.

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These commodities include rice, meat, pharmaceutical products, leather products, electric fans, household goods, textiles, surgical instruments, electrical appliances, motorcycles and tractors.

The list of imported items includes petroleum products including coal, wheat, fruits and vegetables.

No need for dollars anymore
Pakistan needs dollars for its exports, but the country will not need dollars for trade with Afghanistan, Iran and Russia. Pakistan can also increase its trade through barter trade.

Global Restrictions
Due to international sanctions imposed on Iran and Russia, Pakistan’s trade with these countries was being affected, while banking channels in Afghanistan are also not fully functional. In such a situation, Pakistan has apparently taken an acceptable step by approving barter trade.

Pakistan’s allowing barter trade seems to be a government compulsion, as the country’s economy is currently in crisis and according to official statistics, the country’s gross domestic product (GDP) rate is only 0.29 percent against the target of five percent.

The total trade volume of Pakistan with different countries of the world is about 100 billion dollars, in which the mutual trade volume with Iran, Afghanistan and Russia is 2.5 to 3%.

The Pakistan-Iran gas pipeline project has been stalled for a long time.

It appears that barter trade may be the solution to the project’s difficulties, as petroleum products, including gas and coal, can be imported from Iran through barter trade, among other things.

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