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Afghan banking system collapses under Taliban rule

Failure of Afghan banking system has adversely affected Pakistan’s exports in cement, pharmaceutical and other sectors.

In view of the grave situation, Pak Afghan Joint Chamber of Commerce & Industry has suggested deliberating barter mechanism across the border.

Karachi

The Taliban rule in Afghanistan has badly affected their banking system that has created many issues besides adversely affecting the trade between Afghanistan and Pakistan.

This transpired from a statement issued by the Pakistan Afghanistan Joint Chamber of Commerce & Industry, which stated that a meeting was held with Ministry of Commerce to deliberate upon banking issues being faced while transacting with Afghanistan despite relaxation in OFAC restriction.

It was mentioned that still commercial banks and corresponding banks are not supporting the payments leading to significant losses to businesses while affecting exports of Pakistan mainly. “Keeping in view foreign exchange dearth and stagnant banking structure in Afghanistan, it is but evident that transactions via land route will be processed more either in rupee to rupee trade or barter (once mechanism is in place),” it added.

The limitation in Export Policy Order on Sales Tax and Duty Drawback once transactions are conducted via land route is becoming major obstacle as mainly highlighted by Pharmaceutical and Cement Sectors to PAJCCI, as a result exports has declined in these sectors creating tilted Balance of Trade.

It was therefore an effective ‘WeBoC’ system (an indigenously developed, web-based computerized clearance system, providing end to end automated customs clearance of import and export goods) at each border crossing was suggested as the banking system would not be supportive under current regime. It was further suggested that land route transactions may be enhanced by waiver in context of land routes whereby Sales Tax refund and Duty Drawback may be given without any further requirements.

Keeping in view reluctance of banking sector and policies of State Bank of Pakistan, it was urged that either Pakistan should revert back to previous system of Cash on Counter facility or consider further extension of waiver of EIF and E-Form till any stable process is in place.

PAJCCI proposed that at least extension be done till 6 months so that new system or alternative mechanism may be deliberated aptly during that time.

Meanwhile, for enhancement in trading in Pakistan rupee, Ministry asked to suggest categories where export proceeds are more than imports or support domestic manufacturing, as these can be considered for addition.

Afghan side nominated committee for barter trade whereby PAJCCI’s Co-Chairman Khan Jan Alokozai is leading the committee, on the same lines. It was unanimously agreed to nominate PAJCCI as the lead chamber from Pakistan whereby Zubair Motiwala will lead the private sector committee.

Motiwala specified that once this committee will be notified PAJCCI will hold grand meeting to deliberate barter trade mechanism with all relevant chambers and associations so as to develop a system incorporating wider concerns. It will also hold a joint meeting across the border for finalizing the terms of reference. (PR)

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