Afghan Transit Trade exerts $6bn impact on PKR exchange rate

October 09, 2023 (MLN): Afghan transit trade has a significant economic impact on Pakistan, resulting in a loss of around $6 billion for the county, Syed Shabbar Zaidi, former Chairman of the Federal Board of Revenue (FBR) highlighted in a recent interview on live television.

According to Shabbar Zaidi, Afghanistan's imports are estimated at $8bn while their exports, including remittances, amount to only $1.5-2bn. He stated that Afghanistan technically uses Pakistan’s dollars to import the difference of a $6 billion deficit.

Moreover, Shabbar Zaidi pointed out that a substantial portion of Afghan transit trade does not reach Afghanistan but instead remains in Pakistan.

He highlighted that this practice effectively results in Afghanistan utilizing Pakistan's dollars, additionally impacting negatively on the local currency’s exchange rate.

He emphasized that this significantly impacts the USD to PKR exchange rate.

He claimed that if the Afghan transit trade issue is resolved, the exchange rate could be around PKR 250 per dollar, instead of the current ~280 per dollar.

Positive steps

To address the issue of Afghan transit trade, Pakistan's Ministry of Commerce recently took a decisive step by imposing a ban on 212 items that were previously being imported into Afghanistan via Pakistan under the Afghan transit trade agreement.

This move, made through a Statutory Regulatory Order (SRO) issued on October 03, was in exercise of the powers conferred by the Imports and Exports (Control) Act, 1950.

Additionally, the FBR has imposed a 10% processing fee on five major categories of Afghan transit commercial goods imported into Afghanistan through Pakistan.

Shabbar Zaidi welcomed these steps and said that they would help reduce the pressure on Pakistan’s economy.

He said that he thinks that if Pakistan can manage the Afghan transit trade issue, it can solve 20% of its economic challenges.

Syed Mohammad Shabbar Zaidi is a Pakistani chartered accountant who served as the 26th Chairman of the FBR from May 2019 till April 20

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