Iran is to provide export guarantees to cover the risk of non-payment of all types of trade credit in import and export deals between Iran and Pakistan.

The new facility aims to boost bilateral trade and investment in both countries, according to Iran's export credit agency (ECA).

Cover and banks

The Export Guarantee Fund of Iran (EGF) will provide cover to Pakistani exporters against the risk of non-payment of all kinds of credit including short- medium- and long-term credits, including letter of credits (L/Cs) opened by Iranian buyers.

Iran's ECA will also provide cover against the risk of non-repayment of long- medium- and short-term credits extended by Iranian banks or exporters to Pakistani buyers.

Participating banks

The facility will cover selected L/Cs or letters of guarantee from certain banks.

Five banks will participate initially in the facility. They are National Bank of Pakistan, Habib Bank Ltd, ABN-AMRO Bank, Credite Agricole Indosuez and Deutsche Bank.

Political dimension

The facility, according to EGF, emerged out of a memorandum of understanding signed during the 15th session of the Iran-Pakistan joint economic commission.

During meetings in February, Iran's ministry of economy called for the establishment of a special committee to oversee Iran-Pakistan trade and transportation agreements.

Recent activity

The EGF appears to have been very active over recent months. Earlier this month it announced it would provide cover for Iranian exports to Iraq (DC World News, 21 July 2005).

Recent EGF deals include cover for Iran-Khodro Diesel company to supply 120 buses to the Ivory Coast and US$3 million insurance cover for exports of Iranian tractors to Venezuela.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.