ISLAMABAD: While Pakistan’s exports to Afghanistan have seen a steeper decline since the Taliban took control of Kabul in August 2021, the government on Tuesday took a major decision to allow trade of all products to Kabul to rupee overland due to non-availability of negotiable currencies through banking channels.
The change in trading regime from dollar to rupee is seen as one of the steps to reverse the downward trend in the coming months.
The Economic Coordinating Committee (ECC) of the Cabinet has approved a summary of the Ministry of Commerce amending the Import Policy Ordinance (IPO) to allow trade with Afghanistan in rupees for a period of one year. It is believed that the regime will remain in place until regular banking channels are restored in Afghanistan.
The ECC has approved amended Section 3(1) of IPO 2022 to allow the importation of goods of Afghan origin against Rupees and without the requirement of Electronic Import Forms (EIF) for a period of one year, subject to the Afghan exporters providing a Certificate of Origin issued by Afghan Customs proving that the goods originate in Afghanistan.
ECC approves rupee trade to control export decline
The government uses the EIF as a tool to monitor the source and outflow of foreign remittances and verifies goods imported without foreign currency through the State Bank of Pakistan.
Currently, the government has authorized the export of two dozen products, including fruits, vegetables and cement to Afghanistan in rupees.
Afghanistan was the third largest export destination for Pakistani products, but the trend has changed over the past two years. Pakistan’s exports to Afghanistan fell by 30% to $717.53 million in 2021-22 from $1.018 billion in 2020-21.
Since August 15, 2021, when the Taliban seized power and declared dominance over Afghanistan, Islamabad has offered Kabul – among other humanitarian aid – duty and tax exemptions on fresh and dried fruits, vegetables and several other products.
Following this decision, imports of basic products from Afghanistan registered an unprecedented increase. Pakistan’s trade surplus with Afghanistan has turned into a deficit and a sharp increase in imports has been seen since the Taliban took over.
Imports from Afghanistan reached $801.28 million in FY22 compared to $583.59 million in the previous year, an increase of 37%. In 2019-20, imports from Afghanistan were only $470.9 million.
The data shows that the massive imports from Afghanistan are causing outflows of dollars and causing excessive pressure on the rupee. Moreover, the smuggling of dollars would be another factor in the continuation of the trade in greenbacks.
The government’s decision to allow exports of certain items in rupees did not achieve the expected results, as exports fell sharply in one year.
Currently, the government has already allowed exports of rice, fish and fish products, poultry, meat and products, confectionery and bakery products, fruits, nuts and other edible parts of plants, meal and other solid residues, plant matter and plant waste, salt, cement, pharmaceutical products, matches, textiles and textile articles, building stone, surgical instruments, dairy products are permitted in Pakistani currency.
On January 22, Pakistan authorized the export of 14 more items to Afghanistan in rupees by land. The move helped the Taliban-led regime to continue importing essential food items from Pakistan until the West recognized their government.
Posted in Dawn, July 6, 2022