Karachi (Staff Report): State Bank of Pakistan (SBP) and Bank Markazi Jomhouri Islami Iran (BMJII) today have devised a new payment settlement for trade with Iran, a statement issued by the central bank said.

According to details, the mechanism will be available as an additional mode and does not restrict the use of other permissible mechanisms for settlement of the trade transactions.

The SBP’s statement also said that this mechanism will be available for the payment of goods and services traded between Pakistan and Iran. Accordingly, transactions eligible for settlement under this mechanism will be denominated in Euro or JPY and based only on documentary Letter of Credits (L/Cs) conforming to the Uniform Customs and Practice for Documentary Credits UCP 600 published by the International Chamber of Commerce (ICC).

Last month, the central banks of both countries signed an agreement towards development of payment settlement mechanism.

The SPB also stated that the execution of transactions under this mechanism will be subject to compliance of all applicable foreign exchange rules and regulations.

The Authorized Dealers including commercial banks interested to work under this mechanism are advised to State Bank of Pakistan by May 31, 2017.