PESHAWAR – Afghan transit trade is set receive a boost as the Khyber Pakhtunkhwa (KP) government approved tax exemptions to ease cross-border commerce and humanitarian aid.
In a move aimed at strengthening economic ties and facilitating trade through the Torkham border, the provincial cabinet, led by Chief Minister Ali Amin Gandapur, reduced the Infrastructure Development Cess (IDC) on Afghan transit trade vehicles from 2% to 1% and completely waived the tax for World Food Programme (WFP) aid trucks.
The decision comes as trade between Pakistan and Afghanistan faces multiple hurdles, including tightened regulations and efforts to curb smuggling. The KP government’s latest tax relief measures aim to revive transit trade by reducing financial pressures on traders and aid organizations.
A step toward smoother cross-border trade
During a high-level meeting, the KP Finance Secretary presented concerns raised by Afghan traders and humanitarian agencies about the growing cost of Afghan transit trade. Representatives from Afghan consulate in Peshawar stressed that heavy levies had been stifling trade, while WFP officials urged the government to align with international practices by exempting UN-affiliated humanitarian efforts from transit taxes. After thorough discussions, the cabinet approved these tax cuts, recognizing their potential to enhance trade efficiency and support humanitarian operations.
By lowering the IDC on Afghan transit trade vehicles, the government hopes to encourage legal trade while keeping essential supplies flowing into Afghanistan.
Boost for humanitarian aid and trade ties
The exemption for WFP vehicles is expected to accelerate relief efforts in Afghanistan, where economic instability has heightened food insecurity. With transit taxes lifted, more resources can now be directed toward aid distribution, ensuring timely and effective delivery of food and essential supplies to vulnerable communities.
However, despite the tax relief, significant challenges remain. Infrastructure limitations, security concerns, and ongoing restrictions on trade continue to impact the full potential of Afghan transit trade.
A balancing act for economic policy
Pakistan has recently intensified efforts to regulate Afghan transit trade, primarily to curb smuggling disguised as legal imports. This crackdown has led to a staggering 79% drop in Afghanistan’s imports from Pakistan under transit trade this fiscal year.
According to government sources, trade volumes have declined by 69% in the first seven months of the financial year, translating into a loss of $1.484bn. While these measures have helped reduce illegal trade, they have also raised concerns about the shrinking formal trade sector.
The KP government’s decision to ease tax burdens is seen as a way to strike a balance between regulation and economic facilitation. By maintaining oversight while reducing costs, policymakers hope to sustain Afghan transit trade and prevent further disruptions in cross-border commerce.
What lies ahead?
As the new tax relief measures take effect, traders and aid agencies anticipate a smoother flow of goods and services between the two countries.
The KP government’s decision is a positive step, but experts suggest that additional reforms—such as improved border infrastructure, streamlined customs procedures, and better trade monitoring—will be necessary to fully revive Afghan transit trade.
For now, the tax exemptions provide immediate relief, but the long-term impact will depend on how effectively the government balances trade facilitation with regulatory enforcement.
