1114 GMT February 22, 2020
The agreement 'Banking and Payment Arrangement (BPA)' was signed by SBP Deputy Governor Riaz Riazuddin and CBI Deputy Governor Gholamali Kamyab, thenews.com.pk reported.
"This mechanism will be used for the payment of trade conducted via letter of credit and in accordance with international laws and regulations," said Riazuddin.
The objective of the BPA is to promote trade between Pakistan and Iran. This mechanism will be used for the payment of trade conducted via letters of credit (L/Cs) and in accordance with international laws and regulations.
In the next step, both central banks will invite banks in their respective jurisdiction to act as authorized banks for undertaking trade transactions under this BPA.
The details of the mechanism will be issued by the SBP in due course. The SBP expects that this agreement will help strengthen trade links between the two countries, it added.
Earlier, Lahore Chamber of Commerce and Industry (LCCI) members called for improving trade ties between the two neighboring countries.
Pakistan's Senate was informed on Friday that negotiations are being initiated with Iran for signing the Free Trade Agreement (FTA).
Pakistan's Commerce Minister Khurram Dastgir Khan said during question hour that the government is undertaking consistent efforts to get additional market access for Pakistani products in the international markets.
He said that FTA negotiations with Turkey and Thailand are at on advanced stage. He said a joint research study to assess the potential for preferential trade agreement is also underway.
Early last year, the United States lifted economic sanctions on Iran, paving the way for resumption of formal trade between Iran and other countries.
After the withdrawal of embargo, Pakistan vowed to jack up the sagging bilateral trade with its neighboring country.
Trade between Pakistan and Iran sharply fell to $30 million in the last fiscal year of 2015-16 from $1.32 billion in 2008-09, said the official statistics.
Pakistan's exports to Iran amounted to $30.579 million in the past fiscal year, while its imports stood at minuscule $195,000.
Last year, Pakistani Prime Minister Nawaz Sharif, in a meeting with Iran's President Hassan Rouhani, vowed to lift bilateral trade to $5 billion by 2021.
Iran currently exports around 100 MW of electricity to Pakistan, which is also planning to increase this volume to 1,000 MW.
Oil and gas-rich Iran also wants to export energy to Pakistan.
A senior official told The News that Iran has conditioned the signing of free trade agreement with Pakistan with import of crude oil from Tehran.
Iran also wants utilization of its crude oil in the refinery being built by China in Gwadar port and on top of that it also needs the assurance for its inclusion in China-Pakistan Economic Corridor. China already has many commercial deals in oil and gas sector with Iran.
Iran has shown interest in Pakistani textiles, surgical goods, sports goods and agricultural products.
Pakistan also plans to set up industrial sites in the impoverished border area, especially petrochemical storage.
A meeting of Pakistan-Iran Joint Economic Commission is scheduled in Tehran for April 17-18.