Lack of Tradable Currency
Due to the lack of tradable currency through banking channels, the government on Tuesday made the significant decision to permit trade of all products to Kabul in the rupee via land routes. This decision came as Pakistan’s exports to Afghanistan saw a further decline since the Taliban seized control of Kabul in August 2021.
One of the strategies to stop the declining trend in the upcoming months is thought to be switching the trading currency from the dollar to the rupee.
Commerce Ministry’s Amendment to the Import Policy Order
A summary of the commerce ministry’s amendment to the Import Policy Order (IPO) to permit trade with Afghanistan in rupees for a year was accepted by the Economic Coordination Committee (ECC) of the Cabinet.
The government checks the items that are imported through the State Bank of Pakistan without foreign exchange and uses EIF as a tool to track the origin and outflows of international remittances.
Government Has Approved The Export Of Twenty Different Goods
Currently, the government has approved the export of twenty different goods, including cement, fruits, and vegetables, to Afghanistan.
Afghanistan used to be Pakistan’s third-largest export market, but this has altered during the past few years. Pakistan’s exports to Afghanistan decreased by 30% from $1.018 billion in 2020–21 to $717.53 billion in 2021–22.
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Taliban Seized Power And Proclaimed their Authority
Since the Taliban seized power and proclaimed their authority over Afghanistan on August 15, 2021, Islamabad has provided Kabul with humanitarian assistance as well as waivers of duties and taxes on a variety of goods, including fresh and dried fruits, vegetables, and other food items.
Due to this choice, there was an extraordinary rise in the import of goods from Afghanistan. Since the Taliban seized power, Pakistan’s trade surplus with Afghanistan has changed into a deficit, and imports have significantly increased.
Imports From Afghanistan Increased by 37%
The imports from Afghanistan increased by 37% to $801.28 million in FY22 from $583.59 million in FY21. Only $470.9 million worth of imports came from Afghanistan in 2019–20.
According to the data, Afghanistan’s large-scale imports put undue pressure on the currency by causing dollar outflows. Additionally, it is thought that another reason for the continued trading in dollars is currency smuggling.
The government’s decision to let the export of a few commodities in rupees did not have the expected impact on exports, which fell precipitously in just one year.
Government has Already Approved the Export
Currently, the government has already approved the export of rice, fish, fish products, poultry, meat, and bakery goods. It has also approved the export of salt, cement, pharmaceuticals, matches, textiles and textile products, building stone, surgical instruments, and dairy products in Pakistani rupees.
On January 22, Pakistan permitted the land-based export of 14 more products to Afghanistan. The choice has made it easier for the Taliban-led government to import basic foods from Pakistan while they wait for the West to recognise their authority.