Afghanistan Bears the Brunt of Trade Suspension with Pakistan
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Unlike common perception, the nearly two-and-a-half-month suspension of bilateral trade between Islamabad and Kabul has disproportionately impacted Afghanistan, with export losses significantly higher for Kabul. Trade data reveals Afghan export losses have reached around 10 per cent as October 10, compared to approximately 0.6pc for pakistan, highlighting the uneven economic toll of the prolonged disruption.
The deterioration in Pakistan-Afghanistan relations stems from tensions surrounding the banned Tehreek-i-Taliban Pakistan (TTP), with Islamabad urging Kabul to address cross-border terrorism. Following border clashes on October 11, a temporary ceasefire and subsequent talks in Doha and Istanbul failed to yield a resolution despite mediation efforts by turkey and Qatar. Pakistan declared negotiations effectively over on November 7, leading to afghanistan suspending trade ties – a move that followed Pakistan’s earlier border closure.
The data underscores Afghanistan’s economic vulnerability. nearly 46pc of Afghanistan’s total exports are destined for Pakistan, including a ample volume routed onward to India via the Wagah border. In contrast, Afghanistan accounts for only around 3.46pc of Pakistan’s global exports.This disparity is further compounded by transit trade, representing about 40pc of afghanistan’s total imports.
India has emerged as Kabul’s second-largest export destination, capturing around 40pc of Afghanistan’s total exports despite not sharing a border.Exports to other neighboring countries remain marginal: 1.94pc to Iran, 3.14pc to Uzbekistan, and just 0.37pc to Tajikistan. This concentration of export markets in Pakistan and India, notably the reliance on the Wagah border for onward trade to India, is critical.
While Kabul may attempt to redirect some imports to Central Asian states, Iran, and India, finding alternative markets for its primary exports – fruits and vegetables, which comprised 71pc of total exports in 2024 according to World Bank estimates – will be challenging.
This situation raises questions about the taliban’s willingness to disrupt supply chains that could severely damage the already fragile Afghan economy. Concurrently, Pakistan faces the challenge of managing the loss of a market exceeding $1 billion, despite Afghanistan’s relatively small share in Pakistan’s overall exports.
alternative to Pakistan’s exports
Historically, Afghanistan has managed to find alternatives to Pakistani goods whenever imports were restricted or borders were closed. In recent years, Kabul has increasingly shifted its food and fuel security towards Central asian States, whereas it had previously relied heavily on Pakistan for food imports, particularly flour, sugar, and other essential items.
Pakistan’s major exports to Afghanistan now include cement, pharmaceutical products, rice, and a limited range of textiles and construction materials. The current suspension of trade is therefore providing Kabul with an opportunity, and a justification, to push Afghan importers towards alternative suppliers, perhaps accelerating a shift that could prove tough to reverse even after borders reopen.
President of the Afghanistan-Pakistan Joint Chamber of Commerce (APJCC), Khan Jan Alokozai, said: “Afghan importers have already begun shifting orders away from Pakistan in response to the prolonged suspension of trade, particularly in key sectors such as cement and pharmaceuticals.”
He added that Afghan traders were now placing cement orders with iran, Uzbekistan, and Tajikistan, noting that Iranian cement was available at lower prices than Pakistani supplies. On pharmaceuticals, alokozai said, “Importers had started sourcing medicines from Turkey, uzbekistan, and Iran, while Afghanistan had also begun importing medicines from India via air cargo. At present, Pakistani pharmaceutical products still account for around 60-70pc of Afghanistan’s market, but that share is now under pressure.”
He acknowledged that the trade suspension had resulted in losses on both sides. While prices in Afghanistan had risen in the immediate aftermath of the disruption, he said traders expected the situation to stabilise over time as alternative supply arrangements were put in place. “Business representatives had held several meetings with Afghanistan’s commerce and interior ministers to seek a resolution, but so far no breakthrough had been achieved,” he said.
afghanistan exports to pakistan
In the post-Taliban period, Afghanistan’s exports to Pakistan stood at $795n in FY22, increased to $893m in FY23, fell sharply to $539m in FY24, and then recovered to $612m in FY25, keeping Pakistan as Afghanistan’s single largest export market. This trajectory is frequently enough overlooked in discussions on bilateral trade,despite its importance in understanding the depth of Afghanistan’s dependence on the Pakistani market.
According to a World Bank report, Pakistan accounted for 45pc of Afghanistan’s total exports in 2024, down from 54pc in 2023, but still far ahead of any other destination. The report notes that food and coal dominated these shipments, together making up 63pc of Afghanistan’s exports to Pakistan.
Afghanistan exports to India via Wagah border
After pakistan, India has emerged as Afghanistan’s second-largest export destination, with Afghan exporters relying on a mix of routes to access the Indian market. Shipments move through air cargo and via Iran’s Bandar Abbas port, but a sizable portion of Afghan
Pakistan-Afghanistan Trade Disruption Impacts regional Connectivity and Industry
Recent clashes leading to the closure of the Torkham border crossing between Pakistan and Afghanistan are significantly disrupting trade flows, impacting industries in both countries and hindering emerging trade corridors connecting Pakistan to Central Asian States (cass).The suspension is not only affecting bilateral trade but also two-way transit cargo, raising concerns about economic consequences and planned industrial relocations.
Border Closure and Stranded Cargo
The Torkham border,a crucial artery for trade between Pakistan and Afghanistan,was closed following clashes in September 2023. https://www.reuters.com/world/asia-pacific/pakistan-afghanistan-exchange-fire-border-crossing-2023-09-07/ This closure has resulted in significant logistical bottlenecks. According to Imtiaz Alokozai, a trade representative, containers carrying goods, particularly cotton destined for Pakistan from CASs, are currently stranded on the Afghan side. Conversely, Pakistani transit cargo is accumulating within Afghanistan, demonstrating the rapid and widespread impact of the trade halt.
Impact on Industry and Investment
The disruption extends beyond immediate trade volumes. Ishaq, a former president of the Sarhad Chamber of Commerce and Industry, highlighted that the uncertainty has stalled planned industrial relocation. Segments of the textile industry in Punjab had begun shifting operations to Uzbekistan, seeking more favorable conditions, but this process has been put on hold.
Furthermore, imports of essential commodities like cotton and coal from Uzbekistan and Tajikistan, vital for industries in Khyber pakhtunkhwa (KP) and Punjab, have been affected. These disruptions threaten production schedules and potentially increase costs for Pakistani businesses.
Alternative Routes and Increased Costs
While the Pakistani government has permitted transit through Iran to access CASs markets, this alternative route is considerably longer and more expensive. The distance from Torkham to CASs is approximately 850 kilometers,making it a far more efficient and cost-effective option. Utilizing the Iranian route significantly increases transportation costs, diminishing the competitiveness of both Pakistani exports and imports. https://www.dawn.com/news/1777499
Historical context of Trade Disruptions
The economic relationship between Pakistan and Afghanistan has been historically interconnected, yet frequently interrupted.trade has been suspended on three previous occasions: 1949-1950, 1955, and 1961-1963.
Over time, formal trade has decreased, and trade routes have shifted. The period between 1979 and 1989 saw Afghanistan’s commercial focus increasingly turn towards the northern CASs and western routes through Iran, largely due to regional conflicts. This historical pattern underscores the vulnerability of relying solely on one trade route.
Key Takeaways
* Border Closure Impact: The torkham border closure is causing significant disruptions to trade between Pakistan and Afghanistan, and also transit trade with Central Asian States.
* Industrial Relocation Stalled: Planned industrial relocation from Punjab to Uzbekistan has been halted due to the uncertainty.
* Increased Costs: Alternative trade routes through Iran are significantly longer and more expensive, impacting competitiveness.
* Historical Precedent: Trade disruptions between Pakistan and Afghanistan have occurred repeatedly throughout history, highlighting the need for diversified trade routes.
Looking Ahead
The current situation underscores the importance of stable border relations and diversified trade routes for Pakistan’s economic connectivity with the region. Resolving the issues leading to the Torkham border closure and exploring long-term solutions for facilitating trade, such as improved infrastructure and streamlined customs procedures, are crucial for sustaining economic growth and regional stability. Further investment in alternative routes and strengthening economic ties with both Afghanistan and the CASs will be essential to mitigate future disruptions and unlock the full potential of regional trade.
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