KARACHI: The State Bank of Pakistan (SBP) will soon allow banks to resume ties with Iranian counterparts, an official said on Monday, after the government’s recent lifting of sanctions on the neighbouring Persian Gulf country.
“The central bank will soon issue instruction to banks regarding this,” Chief Spokesman Abid Qamar at the SBP said. “After the issuance of instructions to banks, all permissible transactions with Iran will be possible.”
Qamar said currently the central bank-to-central bank contact is not necessary. “The decision of the (Pakistan’s) government will be intimated to Iranian central bank,” he added.
In February, Pakistan lifted sanctions on Iran pursuant to UN Security Council Resolution 2231. The modalities for lifting of sanctions were finalised at an inter-ministerial meeting chaired by Finance Minister Ishaq Dar. The Ministry of Foreign Affairs issued the formal notification following the meeting, which will revive economic and commercial relationship between Pakistan and Iran, including in the areas of trade, investment, technology, banking, finance and energy.
The lifting of sanctions will enable the two countries to fully reinvigorate various bilateral and multilateral arrangements for promoting investments and cooperation, a finance ministry’s statement said.
In the past, business community demanded the government of resuming official banking channels with Iran to streamline trade but due to sanctions the government was unable to do so.
The resumption of banking ties will enable local importers to open the letters of credit.
Western sanctions on Iran adversely affected its economic relations with Pakistan. The bilateral trade volume fell to $431.76 million in 2010/11 from $1.32 billion in 2008/09 despite the fact both the countries have a preferential trade agreement.
Officials at the Trade Development Authority of Pakistan (TDAP) hoped that Pakistan’s exports to Iran will increase in the post-sanction regime.
They said Iran is the world’s second top importer of rice and the biggest importer of Basmati rice. Iran was the major consumer of Pakistan’s aromatic rice as it consumed 65 percent of Pakistan’s Basmati rice exports.
“However, after tough economic sanctions, Pakistan lost this market to India,” said an official at TDAP.
According to the TDAP’s data, Pakistan’s major exporting goods to Iran in 2014/15 included paper and paper board, orange juice, Basmati rice and other verities, plastic material, surgical items, and kinnow. Major importing goods from Iran to Pakistan included liquefied petroleum gas, gram dry whole, electric transformers, petroleum products, steel scraps, sheep skin and dry fruits.
Business community has seen many economic benefits for both Iran and Pakistan in the post-sanction regime.
The Federation of Pakistan Chamber of Commerce and Industry (FPCCI) said the lifting of sanctions will turn the mega projects, such as Pakistan-Iran pipeline project and 1,000 megawatts electricity imports from Iran into reality.
FPCCI believed that the imported electricity from Iran is much cheaper than the electricity produced by the independent power producers in the country.
Commerce Minister Khurram Dastgir Khan, at a press conference last week, said the government devised strategies to promote trade between Pakistan and Iran in the post-sanctions regime.
Khan said the resumption of official transactions will help the country in clearing outstanding amount against electricity purchase to Iran. The amount was stuck due to sanctions
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