Pakistan and Iran are considering establishing banks in each other's country in order to improve access to letters of credit (L/Cs).

The move would help the countries to massively increase bilateral trade, according to an Iranian official.

Permission sought

Iran's commercial attaché in Karachi, Ahmad Fasihi, says that permission is already being sought from Pakistan's central bank to allow an Iranian bank to provide trade finance, including L/Cs in Karachi.

Similarly, a Pakistani bank would open a branch in Tehran to provide L/Cs and other trade finance products.

L/C benefits

By doing this, the current difficulties traders in each country experience opening L/Cs will be resolved, according to Fasihi.

He reckons this resolution would help trade between the two countries to surge up to US$3 billion a year.

Bilateral trade in 2008 trade between Iran and Pakistan stood at US$500 million.

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