Formal trade remains suspended as Pakistani banks remain reluctant to extend credit

Pakistan and Iran operationalize barter trade

Yesterday, Pakistan and Iran operationalized the trade mechanism across their shared border. Minister of National Food Security and Research Tariq Bashir Cheema claimed that full-fledged barter trade will resume in December. Due to various US/ international sanctions imposed on Iran, Pakistani banks have been reluctant in opening letters of credit (LC) for export to Iran despite the repeated appeal on the part of exporters and traders of the country.

The absence of a credible payment mechanism remains the major irritant in the way of Pakistan-Iran trade. International sanctions, particularly those imposed by the US and European Union in 2010, targeted Iran’s banks. The sanctions prevented Pakistani banks from doing business with their Iranian counterparts including the opening of LCs, which is the most credible method for carrying out international trade transactions.



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