September 23, 2022
There is little trade between Iran and Pakistan because US sanctions have made Pakistani banks very reluctant to do any business with Iran, according to a senior Pakistani businessman.
Pakistan Businesses Forum (PBF) Senior Vice President Muhammad Riaz Khattak said August 1 that Pakistan has a narrow export basket to Iran, as 63 percent of all exports are rice.
A preferential trade agreement (PTA) was signed with Iran in 2006. Tariff concessions were granted to Iran on 309 tariff lines whereas Pakistan was given concessions on 338 tariff lines. Major sectors covered under the PTA include rice, fruits, cotton, cotton yarn, pharmaceutical products and cutlery.
But nothing happened for 11 years. Finally, in 2017, both sides decided to finalize the FTA. However, the unavailability of a payment mechanism casts a shadow on the viability of a much-awaited agreement.
Riaz Khattak briefed the media that a full-fledged barter trade between Pakistan and Iran may resume in December. He said according to official sources all barriers on the transit trade have been abolished.
He said due to US and international sanctions imposed on Iran, Pakistani banks have been reluctant to open letters of credit (LC) for exports to Iran, despite repeated appeals by traders.
The absence of a credible payment mechanism remains the major irritant in the way of Pakistan-Iran trade, he said.