In a significant development following the Taliban’s assumption of power in Kabul, Afghan transit cargo flow has seen a remarkable surge within a year.
The number of containers engaged in Afghan transit trade, transporting goods through Pakistan, has soared by nearly 39 percent, reaching 102,886 containers in the 2022-23 fiscal year, compared to 74,316 containers in the previous year, as per official data compiled by Pakistan Customs.
The initial two months of the current fiscal year have shown a consistent upward trend in cargo volumes, totaling nearly 15,000 containers. Projections for fiscal year 2024 suggest approximately 130,000 containers.
This surge in transit cargo is particularly noteworthy given the absence of banking facilities and US dollars within Afghanistan during the second year of the Taliban government.
The increase in transit cargo highlights a significant shift in the country’s trade dynamics in response to evolving political circumstances.
Since the Taliban’s takeover of Kabul in August 2021, Pakistan has provided tax and duty exemptions on various imported commodities, including fruits and vegetables. Furthermore, since July 6 of the previous year, the government has allowed the trade of all products to Kabul via land routes in rupees, aimed at ensuring the continuous supply of essential goods to support the Kabul government in light of US-imposed restrictions on the Taliban-led government.
According to a customs official, the flow of cargo, which had previously declined, has now witnessed a remarkable increase.
The assessed import value of transit cargoes exhibited significant fluctuations in recent years, with an increase from $4.5 billion in fiscal year 2019-20 to $6.7 billion in the 2022-23 fiscal year, reflecting a 67 percent rise over the previous year.
Smuggling-prone items have witnessed a staggering 63 percent surge in their total import value, increasing from $2.287 billion in the previous year to an astonishing $3.731 billion in fiscal year 2023, raising concerns among authorities and stakeholders about growing smuggling activities in the transit sector.
In fiscal year 2023, the transit trade sector saw substantial increases in the import values of various items, including cotton and cotton fabrics, artificial fabric, knitted fabric, electrical machinery, home appliances, personal appliances, tyres, tea, perfumes, soap, blankets, and footwear.
However, the consumption of smuggling-prone products within Pakistani households witnessed a significant decline from $16.262 billion in the previous year to $9.809 billion in fiscal year 2023, accompanied by a 66 percent decrease in the quantity of these imports.
Several factors have contributed to the sudden rise in cargo imports under the Afghan transit trade agreement, including the State Bank of Pakistan’s withdrawal of financial instrument filing along with goods declaration in July 2021.
The government has introduced significant changes related to the Afghan transit trade agreement, including a 10 percent processing fee on imported items under the agreement. Additionally, the responsibility of guaranteeing goods has shifted from insurance companies to banks, requiring Afghan transit importers to deposit a specific amount of duty and taxes in banks as a bank guarantee.
Moreover, the import of nearly $4 billion worth of smuggling-prone items has been prohibited under the transit agreement through a commerce ministry order (SRO1397(1)12023).
Pakistani authorities express concerns about potential restrictions on liquefied petroleum gas (LPG) imports from Central Asian states via Afghanistan due to LPG shortages domestically.
To address domestic market price fluctuations, Pakistan has turned to duty-free imports of seasonal vegetables, such as tomatoes, onions, and potatoes, from Afghanistan. Delays and restrictions in this regard have a direct impact on price stability in domestic markets.
Notably, Pakistan has been exporting kinnows and fish to Afghanistan in a cross-border trade development.
Experts anticipate that the Taliban-led government is unlikely to respond with retaliatory measures to restrict transit or imports from Pakistan. However, Pakistani officials remain concerned about potential repercussions of implementing a ban on items within the transit trade agreement, fearing it may provoke a response from the Taliban government.
Under the United Nations Convention, landlocked countries have legitimate rights to import goods through the territorial waters of their neighboring countries.