Pakistan is currently facing significant economic challenges, including a crippled economy, depleting foreign reserves, and a balance of payment crisis. However, the recent decision to enter into barter trade agreements with Iran, Russia, and Afghanistan is a stroke of genius and showcases the best of creativity. This out-of-the-box strategy is truly remarkable.
Barter trade allows Pakistan to exchange a wide range of products without the need for foreign reserves in either swap currency or U.S. dollars. This relieves pressure on the decreasing foreign currency reserves. The products available for exchange include natural gas, petroleum, fruits, nuts, rice, milk, vegetables, confectionery, sports goods, electrical items, textiles, pharmaceuticals, and leather.
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The inclusion of pharmaceutical items in the barter trade will empower the local sector to produce medicines, particularly life-saving and general drugs that are either in short supply or have been discontinued due to a lack of ingredients. Both state-owned and privately-owned entities can participate in the barter program after receiving clearance. It is worth noting that this agreement comes at a time when Pakistan has less than a month’s worth of foreign exchange to sustain itself.
Smuggling from Iran and Afghanistan has been severely impacting our economy. While it may not be completely eradicated, barter trade should lead to a reduction in smuggling activities and help save foreign reserves. According to a study conducted by a team of Harvard economists and senior commerce ministry officials, the top commodities smuggled into the country generate as much as $3.3 billion annually (November 25, 2020). These smuggled products include cell phones, tires, engine oil, and edibles. For instance, due to the increased cost of cigarettes, which now sell for Rs 500 per pack compared to the previous Rs 200, Afghan cigarettes have found a lucrative market in Pakistan, offering good quality smoke for as low as Rs 130 per pack.
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A report from the Research & Development Department of the Lahore Chamber of Commerce & Industry reveals that Pakistan is losing approximately US$2.63 billion per year due to the smuggling of just 11 goods (January 12, 2023).
In addition to barter trade, we need to focus on addressing other pressing issues. Here are three suggestions:
First, we should abolish taxes on industries like IT for a period of five years. By offering favorable conditions, we can encourage their growth and expansion, leading to job creation and increased consumer purchasing power.
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Second, we should create opportunities for substantial inflows of money from the gray economy, which operates through unofficial channels. This can be achieved by granting tax exemptions for ten years and providing tax rebates in subsequent years.
Third, our economists need to embrace the realities of the 21st century and acknowledge the significance of cryptocurrency. Crypto is here to stay, and it is imperative to legalize and regulate it. We should hire talented young individuals who possess expertise in this field to leverage its potential.
It’s time for Pakistan to step into the 21st century and embrace innovative strategies that can help us overcome economic challenges.
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The writer is a lawyer, academic and political analyst. She has authored a book titled ‘A Comparative Analysis of Media & Media Laws in Pakistan.’ She can be contacted at: yasmeenali62@gmail.com and tweets at @yasmeen_9
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