Amir Khan

Pakistan has opted for barter trade with the neighbouring countries, which might be a great marketing, but it seems impractical to some extent, Usman Qureshi, Joint Secretary Commerce, said this while talking to WealthPK. Usman saidin July 2023, Pakistan implemented a business-to-business (B2B) barter trade agreement with Afghanistan, Russia, and Iran, aimed at facilitating barter trade for goods like petroleum and gas. “The agreement is seen as a strategic move to reduce dependence on the US dollar, manage balance of payments, and control inflation. However, there are several challenges associated with this trade arrangement. “During FY2022 and FY2023, exports declined by more than 13% to $27.74 billionfrom $31.78 billion. This decline highlights the vital role ofreducing imports in the government's endeavor to tackle the trade imbalance.

Consequently, the country is currently facing a shortage of dollar reserves, prompting the formulation of a policy to initiate barter trade as an alternative measure,”he explained. He said there were multiple concerns for Pakistan concerning the barter trade. One major concern is the potential difficulty in finding suitable trading partners in other countries to facilitate equivalent volume exchanges. Continuing, he said establishing a fair exchange of goods becomes challenging, particularly when dealing with distinct currencies like the Pakistani rupee and the Iranian rial. There is uncertainty surrounding whether both goods will be priced in USD as a potential solution to address these issues. Qureshi pointed out that it was the responsibility of local importers and exporters to make all arrangements while dealing with their counterparts in other countries.

A senior researcher at the Pakistan Institute of Development Economics (PIDE)said the only authentic way to assure transparency and efficiencywas to introduce a third party or a mediator from both sides. "The third party will be needed if both the traders are interested in dealing with the difficulties in the exchange of good," he added. The country's economic cycle is continually hampered by issues such as the balance of payments. Increasing exports and foreign direct investment (FDI) is considered a potential solution, but it needs time, which Pakistan currently lacks. The barter trade agreement signed with Afghanistan, Iran, and Russia is seen as a positive initiative to stabilize Pakistan's economy. However, procedural issues need to be addressed before any exchange can take place. Some experts argue that the barter trade initiative may seem a weak option in today's modern era with well-developed IT-based trading systems.

Credit: INP-WealthPk