Temporary freezing of border trade

Is Pakistan going to permanently lose the Afghan market, or is the current halt in cross-border goods movement just another temporary glitch in bilateral trade?

For now, it is difficult to predict the future trajectory of economic ties between the two neighbours. However, there are growing indications that the Taliban regime in Kabul is steadily reducing its reliance on Pakistan and actively seeking alternative markets and routes for both its exports and transit trade.

Last week, Afghanistan’s deputy prime minister for economic affairs, Mulla Abdul Ghani Baradar, ordered all Afghan traders to settle their contracts within three months, advising them to explore new markets for their goods and trading routes.

“If Pakistan wants the routes to be opened, it will do so with firm and credible guarantees that they will not be closed again under any circumstances or conditions,” he said. The message is unmistakable: Kabul is prepared to sever economic ties unless Islamabad commits to ensuring unobstructed commerce in the future.

If links with Afghanistan remain closed, an estimated 90pc of Khyber Pakhtunkhwa’s industry could shut down, triggering large-scale unemployment

The ultimatum comes after several rounds of peace talks in Doha and Istanbul collapsed, largely because the Taliban regime refused to curb Pakistan-focused militant groups operating from Afghanistan or prevent their fighters from infiltrating into Pakistan to carry out attacks against civilians and security forces. A ceasefire was agreed in talks and is holding. But border trade remains closed as of Oct 11.

The closure has halted both bilateral and transit trade, leaving thousands of cargo containers stranded across Pakistan. Islamabad maintains that the closure has curbed militant movement.

The current standoff follows the worst violence between the two countries since the Taliban seized power in Kabul after the abrupt withdrawal of US forces in 2021.

A Reuters report points out that Afghanistan is increasingly making use of Iran’s tariff and other concessions to shift freight to its Indian-backed port of Chabahar, bypassing Pakistan to avoid recurring border and transit disruptions and reduce dependence.

Afghan officials say incentives from tariff cuts and discounted storage to faster handling are drawing more cargo south. “In the past six months, our trade with Iran has reached $1.6 billion, higher than the $1.1bn exchanged with Pakistan,” Abdul Salam Jawad Akhundzada, a spokesman for the commerce ministry, was quoted by Reuters.

“The facilities at Chabahar have reduced delays and given traders confidence that shipments will not stop when borders close. Iran has installed updated equipment and X-ray scanners, while offering Afghan cargo a 30 per cent cut in port tariffs, 75pc off storage fees and 55pc off docking charges,” he said.

A report in this paper has quoted Pakistani officials and traders saying that Pakistan has already lost over 65pc of the Afghan market to Iran, Central Asian States, Turkiye and even India due to “hostile and aggressive trade policies dictated by security issues since the installation of the Taliban regime in Kabul in August 2021”.

Undoubtedly, as a recent research report by JS Global suggests, Afghanistan, which relies on Pakistan for 41pc of its exports and 14pc of its direct imports (excluding transit trade), will suffer the most — at least in the near to medium term — if trade between the two countries remains suspended for a prolonged period or is stopped permanently.

Yet, analysts and traders warn that Pakistan too cannot remain insulated from its fallout. At stake for Pakistan are thousands of low-paid jobs and the survival of numerous small industrial units in Khyber Pakhtunkhwa that rely on uninterrupted cross-border commerce with Afghanistan, significant export revenues and taxes, as well as access to Central Asia.

It is therefore no surprise that business leaders from the province have urged Islamabad to reconsider the weeks-long border closure, which has already inflicted significant losses on traders on both sides and left thousands of cargo trucks stranded at the crossing.

The JS Global report, which studies the potential impact of the Pak-Afghan border closure and the resulting suspension of trade if the situation persists through the remainder of CY25, says the overall impact on Pakistan trade remains insignificant — 0.5pc or approximately $150-169 million loss of exports from a three-month trade suspension.

But, the report stops short of commenting on long-term implications of complete termination of trade ties with Kabul as it sees “little likelihood of long-term closure of the borders due to a sharp increase in import demand from Afghanistan amid the mass return of Afghan refugees from Iran and Pakistan and heavy reliance on Pakistan for its exports and imports”.

Islamabad says the Afghan decision to stop trade with and through Pakistan would cause no economic harm to the country, or so told Defence Minister Khawaja Asif to a TV channel.

Speaking with Brackly News, Zahidullah Shinwari, a former president of Sarhad Chamber of Commerce and Industry, said bilateral trade between the two sides peaked at around $3bn in 2014, making Afghanistan Pakistan’s third-largest export market after the US and the EU, despite the absence of any preferential or free trade agreement.

However, volumes later began to decline, and after the withdrawal of Nato forces, bilateral trade fell to about $600–700m, largely because of Afghanistan’s weak economic conditions.

Pakistan’s major exports to Afghanistan include industrial goods such as cement, steel products, textiles, footwear and sugar. In addition, agricultural commodities like flour, poultry and fruit also make up a significant share of shipments. A sizable portion of Khyber Pakhtunkhwa’s labour and transport sector is also tied to this bilateral trade. “In Peshawar’s Hayatabad area, modern hospitals, hotels, restaurants and even schools have long depended on Afghan clients, visitors and traders. But the ongoing travel restrictions have sharply reduced Afghan footfall, hurting these businesses as well,” he points out.

Khyber Pakhtunkhwa’s industry is also heavily dependent on trade with Afghanistan, according to him. “Most industrial units in the province struggle to compete with manufacturers in Punjab and Sindh and therefore cannot sell their products competitively in the domestic market.

The Afghan market has long offered them a crucial advantage. If this market closes, an estimated 90pc of Khyber Pakhtunkhwa’s industry could shut down, triggering large-scale unemployment — particularly in the merged tribal districts, where up to 95pc of livelihoods are linked to this trade.”

Mr Shinwari warns that such a collapse would not only devastate the province’s economy but also hit the national economy hard. “The government currently collects taxes equivalent to roughly 30pc of the value of traded goods, amounting to about Rs300m a day. Moreover, an annual loss of $1.2–1.3bn in exports is no small matter for a country already compelled to follow stringent International Monetary Fund diktats to secure external financing.”

He says Iran and the Central Asian republics have already snatched away from Pakistan a significant share of the Afghan market, largely because of recurring border closures. If we do not reopen the borders immediately, there is a real risk that Pakistan will lose whatever share it still retains, he contends.

Published in Brackly News, The Business and Finance Weekly, November 17th, 2025