Iran, Pakistan agree to ditch dollar

Iran and Pakistan have signed an agreement to re-establish banking relationship and carry out trade transactions in local currencies.

Pakistan’s Federal Minister of Commerce Khurram Dastgir Khan supervised the signing of a memorandum of understanding with Iran’s Ambassador Mehdi Honardoost in Islamabad, local media reported on Wednesday.

“The two sides agreed in principle to open banks accounts in their respective central banks for trade transactions in their local currencies,” an unnamed official at the Ministry of Commerce was quoted as saying.

They also agreed to take further steps toward promoting trade and investment ties and materialize a free trade agreement which the two countries have been considering for some time.

Pakistan is negotiating a deal to import 1,000 megawatts of electricity from Iran. Pakistan’s western cities near the border currently receive 100 megawatts of electricity from Iran.   

Energy-starved Pakistan suffers about 12 hours of power cuts per day and is keen to import Iranian oil, gas, iron and steel.

The energy crisis in Pakistan has worsened in recent years over 4,000 megawatts of electricity shortfall. The nation of 190 million people can only supply about two-thirds of its gas needs.

Iran in turn is interested in Pakistani textiles, surgical goods, sports goods and agricultural products.

The absence of a payment mechanism was a key hurdle in trade ties between the two neighbors after the lifting of sanctions on the Islamic Republic in January. 

Honardoos said, “Both the countries must work on developing long-term economic and trade policies and initiate interaction between their free trade zones.”

SS