Pakistan’s current account deficit stood at $773 million in July 2021, the best thing to happen for this scenario is this latest development that indicates Pakistan may trade with Afghanistan in rupee.
Minister of Finance and Revenue Shaukat Tarin told the Senate Standing Committee on Finance that trade with Afghanistan would be in PKR now as the new government wanted to save its dollar reserves.
Commenting on the development, Pakistan Businesses Forum Vice President Ahmad Jawad said it was a good move for Pakistan’s importers too, to deal in rupee.
“In a currency swap arrangement, countries that buy from each other pay in their respective currency at a pre-determined exchange rate instead of trading in US dollar. This helps save foreign exchange and strengthens their currencies.”
In order to go through this deal, both the governments have to form action and planning committees.
“While it is negative in terms of US dollar inflow into Pakistan, it is not a huge amount,” said Topline Securities economist Atif Zafar.
Most importantly, this move will strengthen Pakistan’s diplomatic relations with Afghanistan, a neighbor that has a vital role to play when it comes to peace in the region.
“At a time when the economy desperately needs a push for growth, Pakistan can capitalise on the present situation by increasing the scale and depth of economic engagement with Afghanistan,” said former FPCCI president Mian Anjum Nisar.
“Our economy is at the crossroads in the wake of a dramatic drop scene of the US-led war in Afghanistan with the return of Taliban back to power, but in this crisis Pak-Afghan trade can be multiplied manifold if the irritants are removed and traders are facilitated.”
Afghanistan’s economy shrank by 1.9% last year (2020), Nisar said. The country has the second-lowest per capita income in the south-asian region.
Things are in a flux and there is every chance that the situation can deteriorate further as the aid flow may be disrupted. Particularly because 80% of Afghanistan’s budget is financed by aid.
“It would serve us better if we lie low and do our homework to deal with all possible scenarios in Afghanistan, as logistics facilities, including sufficient weighing bridges and swift customs clearance, can shorten travel time, reduce wastages and increase the overall trade to the benefit of the two countries and their people,” he added.
“I think trade with Iran and China too should be in rupee, as we make substantial imports from China,” said Jawad.