The State Bank of Pakistan (SBP) signed a Banking and Payment Arrangement (BPA) with Iran’s central bank, Bank Markazi Jomhouri Islami Iran (BMJII), on Friday in Tehran.

Deputy Governor SBP Riaz Riazuddin and Vice Governor BMJII signed the agreement on behalf of their central banks, said a statement released by SBP.

“The objective of this BPA is to provide a trade settlement mechanism to promote trade between Pakistan and Iran,” said the statement.

The agreement will be used for payment of trade conducted via letter of credit in accordance with international law and regulations.

“In the next step, both the central banks will invite banks in their respective jurisdiction to act as Authorised Banks for undertaking trade transactions under this BPA, added the statement.

The statement further added that details of the agreement will be issued by SBP.

“The State Bank of Pakistan expects that this agreement will help in strengthening trade links between the two countries.”