Boosting Pakistan's Economy: Call to Ease Imports as Afghan Transit Trade Surpasses $7.3 Billion
The chairman of BMP, Mian Anjum Nisar, emphasizes that administrative measures alone are insufficient to eliminate smuggling and suggests that lowering tariff rates could deter this illegal activity.
The Nation 
ISLAMABAD 10/23/2023: The Businessmen Panel (BMP) of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has put forth a proposal to the government, urging a reduction in tariff rates for items prone to smuggling to combat the rise in smuggling. This recommendation comes as Afghanistan's imports through Pakistan under the transit trade facility saw a significant increase of nearly two-thirds, reaching a remarkable $7.3 billion in the last fiscal year.
Mian Anjum Nisar, former president of FPCCI and Chairman of the Businessmen Panel (BMP), highlighted the challenges of completely eradicating smuggling through administrative measures at the borders. He emphasized that the key to addressing this issue lies in reducing the incentives for smuggling by lowering tariff rates. Smuggling poses a significant threat to Pakistan's economic well-being, rendering locally produced goods uncompetitive and discouraging legal imports, resulting in substantial losses to trade, industry, and the government's revenue.
Smuggling costs the nation billions of dollars
Despite the efforts of the Federal Board of Revenue (FBR), which operates with limited resources, curbing smuggling at the borders of Iran and Afghanistan remains a formidable challenge. Effectively tackling this issue could lead to increased government revenue, stimulate local trade and industry, and create job opportunities. Mian Anjum Nisar emphasized that eliminating smuggling, which costs the nation billions of dollars, could reduce the need for external borrowing to cover budget deficits.
Smuggling has emerged as a significant obstacle to economic growth. The BMP Chairman called on relevant authorities to cease harassing traders and establish an efficient monitoring system at border points to combat illegal trade. Smuggled goods passing through Afghanistan, Iran, China, India, and the Afghan Transit Trade contribute to the informal economy. High taxes and duties create an environment conducive to smuggling, necessitating a reduction in duty rates, particularly for items susceptible to smuggling.
Interestingly, there seems to be a correlation between the surge in transit trade and the decline in Pakistan's direct imports. Out of the $2.8 billion increase in imports under the Afghan transit trade in the previous fiscal year, approximately $2.3 billion consisted of goods that Pakistan did not import due to balance of payments constraints, as indicated by official statistics.
Afghanistan imported $7.3 billion worth of goods through Pakistan during the fiscal year 2022-23, a substantial $2.8 billion increase compared to the preceding fiscal year. Recent government measures, including a complete ban on certain imports under the transit deal, a 10 percent import fee on selected items, and a requirement for a bank guarantee equal to duties and taxes for Afghan imports, aim to ensure that goods imported by Afghanistan reach their intended destination.
The misuse of the transit trade agreement has been a persistent issue, with Afghanistan often placing blame on Pakistan for lax enforcement. Afghanistan argues that, as a trading nation, it imports goods for resale to landlocked Central Asian states.
As Pakistan navigates these challenges, a balanced approach to tariffs and better border monitoring may be key to curbing smuggling and promoting economic growth.
