ECC authorizes legal mechanism for barter trade with Iran and Afghanistan
ISLAMABAD: Pakistan on Thursday authorized a legal mechanism to allow barter trade with two sanctions-hit neighbors – Iran and Afghanistan.
The decision was taken during a meeting of the cabinet’s Economic Coordinating Committee (ECC) which also decided to build up 500,000 tonnes of strategic sugar reserves and raise 1.2 million tonnes of wheat at a support price. minimum of Rs 1,950 per 40 kg amounting to Rs 65 billion.
The meeting, chaired by Finance Minister Shaukat Tarin, did not approve the Utility Store Corporation (USC) Ramazan grant program and grant on five key elements for the first 23 days of February, but authorized it for March and the remaining six days of February.
According to an official statement, the meeting reviewed a Commerce Ministry’s summary for “providing regulatory support for the establishment of barter deals with Afghanistan and Iran” and, after discussions , “authorized the regulatory coverage of barter agreements by modifying the relevant provisions of the export policy”. Order (EPO) 2020 and Import Policy Order (IPO) 2020”.
Decides to constitute 500,000 tons of strategic sugar reserves and to raise 1.2 million tons of wheat
Trade between Pakistan and Iran has stagnated for more than a decade mainly due to US sanctions against Tehran, while formal Pakistani trade suffers from the absence of a banking system and Washington’s decision to freeze the assets of the Afghan central bank.
To get out of it, the Chamber of Commerce and Industry of Quetta and the Iranian Chamber of Commerce and Industry of Zahidan had signed an agreement last November for a barter mechanism. Subsequently, other chambers in both countries were also integrated into the same system.
The same mechanism would also be replicated with Afghanistan given its heavy dependence on Pakistan for essential commodities.
The challenge, however, was that under EPO 2020, Pakistani exports are covered by the State Bank of Pakistan’s foreign exchange regulations, which do not provide for a barter arrangement. Similarly, imports under the IPO 2020 are permitted under SBP’s payment procedures.
In order to overcome this challenge, the ECC, on the recommendations of the Ministry of Commerce, decided to insert a clause “provided that exports and imports are also permitted under barter agreements” approved by the Ministry. both in EPO and IPO 2020. The terms of entering into barter agreements would be notified separately by the Department of Commerce in consultation with the SBP and the Federal Board of Revenue.
The ECC also enabled the Ministry of Industries and Production to build up strategic sugar reserves to avoid its price hike in the future by purchasing 300,000 tonnes of sugar. He called on the governments of Punjab and Sindh to purchase 200,000 tonnes of sugar for strategic sugar mill reserves during the current crop year when prices are lower in the local market.
On another summary submitted by the Ministry of Industry and Production, the ECC authorized the continuation of the subsidy on five essential products – wheat flour, ghee, sugar, rice and pulses – for a period from February 24 to 28 and for the month of March of this year.
Since USC had already continued to subsidize these items in February without prior approval, the Treasury Secretary directed the company to seek advice from the Department of Law and Justice on continued subsidization of these items during the 23 first days of February.
Most likely, the ECC would later give ex post facto approval of the grant on the advice of the Legal Division during those 23 days.
The Ministry of National Food Security and Research (MNFSR) presented a summary of the setting of Passco (Pakistan Agricultural Storage and Services Corporation) wheat supply targets as well as cash credit limits.
The ECC has assigned Passco a target of 1.20 million tonnes of wheat with a cash credit limit (CCL) of Rs 65 billion at a minimum support price of Rs 1,950 per 40 kg. The meeting also enabled the withdrawal of an earlier MNFSR summary for 50,000 tonnes of wheat for Afghanistan and granted clearance for 6,627 tonnes of wheat already supplied worth Rs 670 million to the Afghanistan.
The ECC has approved four additional grants worth Rs 1.354 billion. These included Rs 684 million to the Ministry of Economic Affairs as the first mobilization installment/advance against the disbursement schedule provided by the National Database and Registration Authority for the financial year 2021-22; 220 million rupees to the Ministry of Housing and Public Works for the execution of development projects worth 20 million rupees in Sindh; and Rs 200 million in allocations under the Public Sector Development Program. Another grant of Rs450m has also been awarded to the Ministry of National Health Services to “strengthen the existing capacity of the National Institute of Health for an effective response against the Covid-19 pandemic in Pakistan”.
Posted in Dawn, February 25, 2022