ISLAMABAD - Pakistan has authorized barter trade with Iran, Afghanistan and Russia on specific goods, including petroleum and gas, to bypass Western sanctions on those countries and ease pressure on its declining foreign exchange reserves.

The Ministry of Commerce said Friday that its order, the Business-to-Business Barter Trade Mechanism 2023, 'shall come into force at once.'

Pakistan, a country of about 230 million people, is scrambling to manage a balance of payments crisis and rein in skyrocketing inflation.

This week, the country's central bank reported that its foreign currency reserves had fallen to just over $4 billion, barely enough to cover one month's imports. Inflation hit an unprecedented annual rate of nearly 38% last month, official data showed.

The barter trade mechanism lists 26 commodities that Pakistani state and privately owned entities can export to Afghan, Iranian and Russian markets. In exchange, they can import crude oil, liquid natural gas, liquid propane gas, chemical products, fertilizers, fruits, wheat, industrial machinery and vegetables from the three countries.

Although the United States has designated third-party sanctions on those buying Iranian oil, it might overlook a barter deal.

FILE - A crude oil tanker lies at anchor near the terminal Kozmino in Nakhodka Bay near the port city of Nakhodka, Russia, Dec. 4, 2022. Pakistan is to receive a shipment of Russian crude oil in June 2023.

Pakistan is set to receive its first shipment of Russian discounted crude oil later this month. Islamabad, which has shared few details on the deal with Moscow, has not clarified how payment would be made.

State Minister for Petroleum Musadik Malik said Islamabad would buy only Russian crude oil, not refined products, under the deal, saying purchases could rise to 100,000 barrels per day if the first transaction goes smoothly.

'The [100,000 tons of] Russian oil will reach Pakistan by the end of the first week or at the beginning of the second [week] in June,' he told reporters last week.

Last month, Pakistan and Iran jointly inaugurated the first of the six border markets the countries are building to enhance bilateral trade cooperation.

The Pakistan Petroleum Dealers Association complained last month that up to 35% of the diesel sold in the country had been smuggled from Iran. The countries share a nearly 900-kilometer border. Pakistan has fenced most of that frontier to deter illegal movement in either direction.

Despite the fencing, regional traders and residents allege smuggling, particularly of petroleum products, is facilitated by Iranian and Pakistani border guards, charges officials in both countries reject.

Pakistan's bilateral trade with Afghanistan, especially the import of Afghan coal, has dramatically increased since the Taliban seized control of the landlocked neighboring country in August 2021. The two countries conduct trade mostly in cash while using a barter mechanism for certain goods.

The hardline de facto Afghan authorities' return to power prompted Western nations to terminate all economic assistance for the largely aid-dependent nation and impose banking sector sanctions, effectively blocking Afghanistan from conducting regular trade with other countries.

This article contains content from Reuters.