Trade with Iran, Afghanistan without EIF, FI waivers will remain difficult: SBP

ISLAMABAD: The State Bank of Pakistan (SBP) has stated that establishing formal banking relationships with Iran and Afghanistan and facilitating trade with these countries will remain difficult without waivers for the Electronic Import Form (EIF) and Financial Instruments (FI), sources in the Ministry of Commerce told Business Recorder.

According to sources, due to the absence of active banking ties (correspondent import arrangements) with Afghanistan and Iran, and given the unique nature of trade with these neighbouring countries, the Ministry of Commerce (MoC), in consultation with relevant stakeholders, had earlier decided to waive the EIF and FI requirements to facilitate trade.

However, SBP previously raised concerns over potential misuse of this facility, as these transactions are settled outside the formal banking system. To mitigate these risks, the SBP emphasized the need for additional controls within the WEBOC and Pakistan Single Window (PSW) systems. These controls would help ensure that only genuine importers, exporters, and traders benefit from the facilitation. The SBP further maintained that such waivers or exemptions should be limited strictly to non-sanctioned goods of Iranian and Afghan origin.

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The SBP reiterated that without the EIF/FI waivers, trade with Iran and Afghanistan would remain difficult unless formal banking channels are established. It recommended that a policy-level decision on this issue should be made by the federal government, specifically the Economic Coordination Committee (ECC) of the Cabinet.

The SBP also suggested operationalizing barter trade arrangements with both countries as a more secure alternative to granting waivers, which could lead to misuse via informal financial channels.

The import and export of goods to and from Pakistan are regulated by the Ministry of Commerce through the Import Policy Order (IPO) and Export Policy Order (EPO), respectively, under the Imports and Exports (Control) Act, 1950. As per sources, Para 3 of the IPO and EPO allows imports and exports through all modes of payment in line with foreign exchange regulations and procedures prescribed by the SBP. It also permits barter trade arrangements. Foreign exchange policy in Pakistan is governed by the Foreign Exchange Regulation Act, 1947. Under this Act, the SBP issues directions and instructions to banks regarding foreign exchange transactions.

While Chapter 13 (“Imports”) of the SBP’s Foreign Exchange Manual outlines the regulations related to imports, it does not contain specific instructions for imports from Afghanistan and Iran.

Chapter 12 (“Exports”) of FEM contains instructions regarding exports from Pakistan. However, some specific instructions related to exports to Afghanistan are outlined which include: (i) instructions for exports to Afghanistan against settlement in PKR and in convertible currencies, which was implemented since EPO 2000, as per MoC SRO 137(1)/2002 of March 7, 2002 ; and (ii) in view of peculiar nature of trade with Afghanistan, the banks are allowed to accept cash convertible currencies brought over their counter by the exporters and convert the same at the prevailing exchange rate applicable for normal export proceeds for credit to the PKR account of the of the exporter.

It has been proposed that the requirement for the issuance of certificate of origin should be mandatory for the goods coming from Iran and Afghanistan through land routes, as import from other countries can be settled through the normal banking channels. This requirement should apply to all goods imported from Iran & Afghanistan. There is no justification for goods of non-Iranian origin - such as those originating from China, Singapore, UAE, Hong Kong, Malaysia etc. to be imported/routed through these countries.

There are no restrictions for importing the goods directly from the aforementioned countries and import from them can easily be made through normal banking channels directly. Routing all transactions through the normal banking channels from these countries will not only improve the visibility of trade transactions but will also discourage usage of informal channels for settlement.

Earlier in 2023, FBR & MoC had issued four SROs aimed at regulating Afghan Transit Trade by imposing ban on certain items (which were smuggled back into Pakistan and had no demand in Afghanistan) as well as imposing 10% processing fee etc.

“It seems that some of these restricted items are being brought into Pakistan through Iran, to avoid / circumvent MoC’s restrictions,” the sources concluded.

Copyright Business Recorder, 2025