KARACHI: Pakistan has passed a special order to allow barter trade with Afghanistan, Iran and Russia for certain goods, including petroleum and natural gas, the Ministry of Commerce said on Friday.

Left with barely enough foreign exchange reserves to cover one month’s imports, the government is desperately trying to manage a balance of payments crisis and bring inflation under control after it hit a record of nearly 38 per cent last month.

The government order, called the business-to-business (B2B) Barter Trade Mechanism 2023 and dated June 1, lists goods that can be bartered. State and privately owned entities would need approval to participate in the trade mechanism.

Sajid Amin, deputy director of the Sustainable Development Policy Institute, said Pakistan could gain from the barter trade, particularly from oil and energy imports from Russia and Iran without adding to dollar demand.

The barter opportunity is important considering the dollar shortages the countries face, he pointed out.

“While it may not solve currency smuggling, particularly at the Afghanistan border, it can discourage smuggling of goods from Iran, such as diesel, and Afghanistan which is hurting the economy,” Mr Amin added.

After Pakistan’s first purchase of discounted Russian oil in April, Minister of State for Petroleum Musadik Malik told Reuters that the country would only be buying crude, not refined products, under the deal.

There was no confirmation about how payment would be made but Mr Malik said purchases could rise to 100,000 barrels per day (bpd) if the first transaction went smoothly.

Last year, Pakistan imported 154,000 bpd of crude oil, little changed from 2021, data from analytics firm Kpler showed.

In May, the Pakistan Petroleum Dealers Association complained that up to 35pc of the diesel sold in Pakistan had been smuggled from Iran. The government has also ordered a clampdown on smuggling of flour, wheat, sugar and fertiliser to Afghanistan.

Published in Dawn, June 3rd, 2023