Pakistani businessmen will open letters of credit (LCs) for imports from Iran in euros instead of dollars as some US sanctions are still in place that could obstruct payments to Tehran.
The State Bank of Pakistan (SBP) told the Ministry of Commerce and other stakeholders in a recent meeting that it was not possible at this stage to open LCs in dollars in trade with Iran, a senior officer in the ministry told The Express Tribune.
The central bank was of the view that businessmen could now start trade with Iran following the lifting of sanctions by the United Nations under a nuclear deal with the Islamic republic.
However, if LCs were opened in dollars, clearance from US intermediary bank would be needed, however, certain sanctions were still in place in US and that would cause trouble for the Pakistani businessmen.
This is the reason why the SBP has given advice that LCs for immediate trade must be opened in euros. There won’t be any such issue with the euro as any intermediary bank in the EU could clear the LCs, the officer said.
In this regard, the Ministry of Commerce and the State Bank are apprising the business community of the merits of trade in euros and a relevant seminar has also been arranged in the first week of next month in Karachi.
The officer suggested that instead of waiting for the removal of all sanctions, Pakistan must engage in trade deals with Iran with payments in euros. “We have informed the Iranian side about this option and hopefully LCs will be opened in coming days.”
Apart from this, the Ministry of Commerce is preparing certain trade proposals that will be shared with an Iranian delegation, led by President Hassan Rouhani, which is expected to arrive in Pakistan next week.
“Major focus will be on a five-year business road map as we have already shared a draft with the Iranian officials,” said the officer.
The commerce ministry sees significant opportunities for trade and investment with Iran that must be tapped.
Last week, a high-level meeting was held in the ministry where representatives of the Federal Board of Revenue, State Bank, ministries of finance, national food security and research and petroleum and natural resources discussed the avenues of commerce with neighbouring countries.
Published in The Express Tribune, March 24th, 2016.