The State Bank of Pakistan (SBP) has proposed gargantuan changes in the country’s trade regime with Afganistan, according to media reports.
According to insider sources close to the Prime Minister’s Adviser on Finance, the SBP has suggestion have indicated that Pakistan might opt to settle export proceeds with Afghanistan in Pakistani rupees.
The proposals have come directly from recently appointed SBP Governor, Dr Reza Baqir, who is of the school of thought that the current trade facilitation mechanism with Afghanistan is behind Pakistan’s current exchange rate woes.
The SBP Governor said that Pakistan has been accommodating Afghanistan due to Geo-political realities in the region for many years, and has been facing severe risk in turn.
Pakistan’s exports to Afghanistan on average have been around $1.4 billion during the last five years, with nearly 45% of this amount being settled in cash US dollars. This courtesy had been extended to Afghanistan because they lacked a well established banking and financial system.
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