Pakistan has passed a special order to allow barter trade with Afghanistan, Iran and Russia for certain goods, including oil and gas, the Ministry of Commerce said Friday.

Left with barely enough foreign exchange reserves to cover one month's imports, Pakistan's government is desperately trying to manage a balance of payments crisis and bring inflation under control after it hit a record of nearly 38% last month.

The government order, called the Business-to-business (B2B) Barter Trade Mechanism 2023 and dated June 1, lists goods that can be bartered. State and privately owned entities would need approval to participate in the trade mechanism.

Although the United States has designated third-party sanctions on those buying Iranian oil, a barter deal might be overlooked by Washington. China buys large quantities of illicit Iranian crude exports with little push-back by Washington.

After Pakistan's first purchase of discounted Russian oil in April, petroleum minister Musadik Malik told Reuters that Pakistan would only be buying crude, not refined products under the deal.

There was no confirmation about how the payment would be made. But Malik said purchases could rise to 100,000 barrels per day (bpd) if the first transaction went smoothly.

Last year, Pakistan imported 154,000 bpd of crude oil, little changed from 2021, data from analytics firm Kpler showed.

In May, Pakistan Petroleum Dealers Association complained that up to 35% of the diesel sold in Pakistan had been smuggled from Iran.

Pakistan's government has also ordered a clamp down on smuggling of flour, wheat, sugar, and fertilizer to Afghanistan.

Report by Reuters