The State Bank of Pakistan (SBP) and Central Bank of the Islamic Republic of Iran (CBI) have reached an agreement on banking and payment, as the two countries seek to raise the volume of bilateral trade to $5 billion.

SBP Deputy Governor Riaz Riazuddin and Gholamali Kamyab, the CBI deputy governor for forex affairs, signed the agreement on behalf of their respective central banks in the Iranian capital Tehran on Friday.

The agreement seeks "to provide a trade settlement mechanism to promote trade between Pakistan and Iran. This mechanism will be used for the payment of trade conducted via letter of credit (L/Cs) and in accordance with international laws and regulations," said an official statement released by the SBP.

"In the next step, both the central banks will invite banks in their respective jurisdiction to act as authorized banks for undertaking trade transactions under this" agreement, the statement read, adding, "Details of the mechanism will be issued by the SBP in due course."

The statement, which was released ahead of a new session of the Iran-Pakistan joint economic committee, also expressed hope that the agreement would lead to boosting trade ties between Tehran and Islamabad.

The 20th session of the joint committee is scheduled to be held on April 17-18 in Tehran, and a delegation from the neighboring country, including deputy ministers and directors at Pakistan's miniseries of economy, trade, oil, industry, communication and power along with senior banking authorities, are due to arrive on Saturday in Tehran.

Speaking at a business conference with Rouhani in Pakistan in late March, Pakistani Prime Minister Nawaz Sharif said Islamabad and Tehran had signed an agreement to increase annual trade volume to $5 billion by 2021.

Heading a high-ranking politico-economic delegation, including 60 Iranian businessmen, Rouhani paid his first landmark visit to Pakistan since the conclusion of a nuclear agreement, dubbed the Joint Comprehensive Plan of Action (JCPOA), which was clinched by Iran and the P5+1 group of countries in July 2015.

/SR