KARACHI, (Reuters) – According to the Ministry of Commerce, Pakistan has issued a special order allowing barter commerce with Afghanistan, Iran, and Russia for specific items such as petroleum and natural gas.
Pakistan’s government is frantically attempting to handle a balance of payments crisis and keep inflation under control after it touched a record of over 38% last month, with just enough foreign currency reserves to cover one month’s imports.
The government directive, titled the Business-to-Business (B2B) Barter Trade Mechanism 2023 and issued June 1, specifies the items that may be bartered. To participate in the trading system, state and privately held organisations would need to be approved.
According to Sajid Amin, deputy director of the Sustainable Development Policy Institute, Pakistan might benefit from oil and energy imports from Russia and Iran without increasing dollar demand. He emphasised that the barter possibility is critical given the nations’ cash deficits.
“While it may not solve currency smuggling, particularly at the Afghan border, it can discourage smuggling of goods from Iran, such as diesel, and Afghanistan, which is hurting the economy,” Amin noted.
Following Pakistan’s initial purchase of cheap Russian oil in April, petroleum minister Musadik Malik told Reuters that the contract would only allow Pakistan to buy crude oil and not processed goods.
There was no word about how payment would be made, but Malik said that if the initial transaction went well, purchases may increase to 100,000 barrels per day (bpd).
According to statistics from analytics company Kpler, Pakistan purchased 154,000 bpd of crude oil last year, barely changed from 2021.
The Pakistan Petroleum Dealers Association alleged in May that up to 35% of fuel sold in Pakistan was smuggled in from Iran.
Pakistan’s government has also ordered a crackdown on flour, wheat, sugar, and fertiliser smuggling to Afghanistan.