Pakistan's crackdown on Iran trade drives up prices

Pakistan and Iran's trade volume exceeds $2 billion (€1.9 billion) annually, with Pakistan selling rice and other products to its neighbor, while people living in the border area of Balochistan save money by buying Iranian food and goods from traders across the border.

There is a tradition of bartering goods — exchanging rice for cement, steel, fruits, dry milk, cooking oil and a number of other commodities — going back decades, according to Rahim Zafar, a trader and politician based in Pakistan's port city of Gwadar.

"In the past, borders would be open and people could just walk into the Iranian territory exchanging commodities," Zafar said. But now, according to Zafar, authorities have fenced most of the 904-kilometer-long (562-mile-long) border between the two countries.

The fence made it difficult to trade in the same way. And more recently, Pakistani authorities also started clamping down on traders importing items from the Iranian side.

What's behind the clampdown?

The military was deployed in a bid to protect Pakistan's ailing currency. The country's army chief, General Syed Asim Munir, announced an operation earlier this month to crack down on the informal foreign exchange market.

It worked. Tens of millions of dollars poured back into Pakistan's interbank network and open markets, dealers said, since raids on black market operators began a few weeks ago.

Authorities also vowed to prevent informal trade on the Pakistan-Iran border. This includes the exchange of goods between Baloch people living in Balochistan's border districts and their relatives living across the frontier in Iran's Sistan-Baluchistan province.

Traders and politicians said that the government clamped down on local traders who import oil, cement, diesel, fruits, vegetables, cooking oil, dry milk, biscuits, dates and other commodities from Iran — which created a shortage of some items and led to skyrocketing prices of other Iranian products.

Locals can't afford to buy local products

Balochistan is Pakistan's least-developed province and, as such, depends largely on neighboring Iran to meet its needs for food and other essential commodities.

Mansoor Baloch, an activist from the Balochistan town of Kalat, points out a discrepancy in the prices of basic goods.

"Before the government launched this crackdown a 50 kg bag of cement would cost us just 500 Pakistan rupees (€1.65, $1.75) while the same item was being sold for 1,280 rupees by Pakistani manufacturers," Baloch said.

Fida Hussain Dashti, former president of the Quetta Chamber of Commerce, agrees that Pakistani commodities are not affordable for the people of Balochistan and especially those living in the border areas. He points out that a liter of Iranian cooking oil may cost 200 rupees while the Pakistani is being sold for 350 rupees per kilogram.

Food shortages

Ghulam Hussain, a trader from Gwadar, said that authorities are not letting people buy commodities as freely as they could in the past. He told DW that authorities harass traders and pressure them to buy goods from Pakistan.

"More than 70% of the population of my city is affiliated with this border trade whose livelihood has been affected by this crackdown," said Hussain, adding that the curbs were resulting in a food shortages and empty shelves.

But some argue that the crackdown is the right way to save the economy from cheap Iranian goods.

Dr Farhat Asif, an Islamabad-based analyst, said that the more affordable Iranian goods would often end up being transported to other cities and sold there, which harmed the economy.

Khalid Magsi, a former lawmaker from Balochistan, said that traders were importing too many Iranian goods. He told DW sellers were going beyond the assigned quantity, and that it which should be prevented, adding that any shortages are only temporary.

"I think the government would take some actions to address the shortages," Magsi said.

Jan Achakzai, a spokesman for the Balochistan government, denied that border trade was shut down. He said officials were simply taking steps to prevent smuggling of petrol, diesel and currency, warning that the earnings from smuggling could be used to finance terror operations.

"The pretext of livelihood cannot be used to justify smuggling. We set up border markets to encourage legal trade and more such markets are under consideration to wipe out the trade of goods that are carried out illegally," Achakzai said.

Edited by: Keith Walker