PNN – Emphasizing the importance of connectivity between Iran and Pakistan in facilitating bilateral and regional exchanges, the head of a Pakistani economic think tank stated that concrete political measures, an effective roadmap, and a viable path are required today to achieve the $10 billion trade target between the two nations.
According to the report of Pakistan News Network; Ali Salman, Executive Director of the Policy Research Institute of Market Economy (PRIME) in Islamabad, wrote an article discussing the outlook for $10 billion in trade between Iran and Pakistan. He addressed the historical context of the two countries’ Preferential Trade Agreement, the decline in trade volume in recent years, and the use of a joint barter mechanism to overcome this challenge and raise the volume of bilateral trade to $3 billion.
He described sanctions and regional geopolitics as complex factors shaping the interplay between the two neighbors’ commitments and the prevailing realities, noting that the recent joint pledge by Iranian and Pakistani officials to boost bilateral trade to $10 billion has garnered significant attention. Achieving this goal requires viable solutions regarding payments, navigating sanctions, and transit connectivity.
He added: In 2006—exactly 20 years ago—Iran and Pakistan signed a “Preferential Trade Agreement” under which Pakistan granted concessions to Iran on 338 tariff lines, while Iran did the same on 309 tariff lines, covering approximately 18% of reciprocal Most-Favored-Nation (MFN) tariffs. That year, according to data from the State Bank of Pakistan, total bilateral trade stood at $638 million, with Iranian exports to Pakistan accounting for $450 million. Key exports from Iran to Pakistan included gas, refined petroleum, electricity, and dried legumes, while major exports from Pakistan to Iran comprised rice, meat, fruits, vegetables, and textiles.
This Pakistani economist wrote: Bilateral trade between Iran and Pakistan reached over $1.3 billion in 2009 before beginning to decline. By 2020, the figure had dropped to $438 million; subsequently, according to official trade records, it has remained at that level. US sanctions and the lack of adequate payment channels became the primary obstacles to the expansion of formal trade.
He added: Since 2023, Iran and Pakistan have been implementing a barter trade system known as the “merchant-to-merchant barter mechanism” to overcome payment channel challenges. Although no public data is available due to the complexity of these transactions, current trade is estimated at around $3 billion—more than double the last recorded level of official bilateral trade.
Salman Ali noted that barter trade can serve only as a temporary measure alongside formal trade. A fundamental condition of barter is interdependence: for instance, if Pakistan wishes to purchase oil of a certain value, it must possess rice of equal value or offer an equivalent basket of goods. This differs significantly from the situation where Pakistan runs trade surpluses with some nations—primarily the United States and the European Union—and deficits with others—mainly China—before arriving at an overall trade balance. In a sense, barter trade belongs to the past—to the era before the concept of comparative advantage gained dominance and reshaped the trajectory of global trade.
Pointing to the regional economic crisis and its impact on bilateral trade between Iran and Pakistan following the onset of US and Israeli aggression against Iran last March, he wrote: Islamabad emerged as a mediator and facilitator of peace talks. Leveraging this position, Pakistan announced in April of this year—under the “Goods Transit via Pakistan Territory Order 2026″—routes for transporting goods to Iran in exchange for encashable bank guarantees.
Citing the recent visit of Iran’s Minister of Industry, Mine and Trade to Islamabad, he added that both nations—through high-level ministerial talks—have expressed their commitment to boosting bilateral trade to $10 billion. This is one of the positive outcomes of the conflict in the region, which has driven both countries to deepen trade and connectivity via official channels.
The head of the Pakistani economic think tank emphasized the urgent need for concrete political measures and the formulation of a roadmap to translate the $10 billion trade target into specific milestones and a credible path forward in order to overcome upcoming challenges.
Addressing the Pakistani government, he wrote: A more practical step for the country would be to seek a sanctions waiver from the United States to import petroleum products from Iran. Several nations—including China, Turkey, and India—have secured similar arrangements that allow them to purchase petroleum products from Iran.
Salman Ali added: As Iran’s neighbor, Pakistan could become a reliable source of affordable energy. To realize this, however, it must also shut down the smuggling routes and informal trade channels that undermine both the formal market and government revenue. A second practical step is to explore local currency exchange between Iran and Pakistan; a proposal to this effect already exists, and Pakistan should take action to operationalize it through the Asian Clearing Union.
The 10th meeting of the Iran-Pakistan Joint Trade Committee was held in Islamabad last week, attended by Seyyed Mohammad Atabak, the Minister of Industry, Mining and Trade.
During the visit, a memorandum of understanding on expanding trade cooperation was signed between the Islamic Republic of Iran and Pakistan, reflecting a mutual commitment to achieving a $10 billion bilateral trade target and making progress toward a free trade agreement.