Pakistan Approves Shift from Bank Guarantees to Insurance Guarantees for Afghan Transit Trade

On Friday, the Economic Coordination Committee (ECC) approved a significant change regarding the import of Di-Ammonium Phosphate (DAP) under the Afghanistan–Pakistan Transit Trade Agreement (APTTA). The committee decided to replace the bank guarantees, which had been imposed on October 7, 2023, with insurance guarantees. This move is expected to facilitate smoother trade and address the concerns of stakeholders involved in Afghan transit trade, particularly through Gwadar Port.

The decision came after a proposal by the Ministry of Maritime Affairs, which highlighted the challenges posed by the bank guarantee system. According to the ECC, the bank guarantees had negatively impacted the transit of bulk cargo, such as wheat, sugar, and fertilizers, which in turn affected investors and businesses operating in Gwadar. This shift to insurance guarantees is expected to simplify the process and make it easier for goods to move through the port. The APTTA, signed in 2010, facilitates trade between Pakistan and Afghanistan, including the transport of Afghan bulk cargo via Gwadar Port with bonded, insured, and trackable trucks.

The Ministry of Maritime Affairs noted that the bank guarantees were a major barrier, and stakeholders—including investors, the Port Operator, and the Gwadar Port Authority—had repeatedly called for their removal. As part of efforts to streamline trade, the ECC has now adopted insurance guarantees, which were introduced under Customs Rules 2021 and previously replaced by the bank guarantee system in October 2023.

In addition to the transit trade decision, the ECC also addressed financial matters concerning Pakistan Steel Mills (PSM). The committee approved the disbursement of projected salaries for PSM employees for the 2024-25 financial year. The Finance Division was authorized to release Rs935.78 million from the approved budget allocation of Rs3.5 billion to cover these monthly salary payments.

Another key decision made by the ECC was the revision of the annual tariff rebasing process for the energy sector. The Power Division proposed an amendment to the legal and regulatory framework governing tariff determinations, and the committee approved these changes. Under the new guidelines, tariff rebasing will be carried out annually, starting from January 1, 2025, following the completion of regulatory proceedings. The Power Division will now work with the National Electric Power Regulatory Authority (NEPRA) to implement these guidelines.

The ECC also approved an extension of regulatory duties on finished flat steel products, as recommended by the Tariff Policy Board. These duties will remain in place until March 31, 2025, but the ECC emphasized that no further extensions would be granted after this date, citing the government’s authority under the Customs Act.

The committee expressed its dissatisfaction with the delayed submission of budget proposals by the Employees’ Old-Age Benefits Institution (EOBI) and the Ministry of Overseas Pakistanis and Human Resource Development (MOPHRD). The budget proposals for FY 2024-25 were reluctantly approved, while the revised estimates for FY 2023-24 were not. The ECC also raised concerns over the delay in EOBI audits, with the last audit conducted in 2019. Authorities were instructed to investigate the delay and report back to the ECC within a week.

These decisions reflect the ECC’s ongoing efforts to streamline processes and address pressing issues in various sectors, from trade to financial management.

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