The ongoing political unrest and smuggling of US dollars to Afghanistan continue to put pressure on Pakistani currency, foreign exchange dealers said on Monday.
“Pakistan is currently dealing with problems on several fronts, the political crisis being the first and biggest one. The dollar crisis is also connected with it,” said Malik Bostan, the chairman of the Exchange Companies Association of Pakistan (ECAP) at a news conference.
The smuggling of US dollars to Afghanistan enhances pressure on Pakistan.
He said every month, about $2 billion goes to Afghanistan from Pakistan in the form of official and unofficial trade, misuse of Afghan transit trade, smuggling, and through the borders, all of which are burdening Pakistan’s foreign exchange reserves.
Currently, Pakistan’s economy is suffering irreparable harm because of the Afghan transit trade, which has grown significantly.
A significant portion of the dollars travelling from Pakistan to Afghanistan passes through the Afghan transit trade, and both Afghan and Pakistani traders are involved in this anti-national activity, he added.
To lower the import bill, the government imposed high duties on many luxury goods.
“Our traders and importers thought, ‘Why should they pay a 200 percent duty to the Pakistani government?,” Bostan said and added they operate a global network, accepting payments through hundi/hawala in Dubai, London, Europe, America, Saudi Arabia, and everywhere else.
They bring their items here in the name of Afghan transit, travelling from our port to Afghanistan and then returning to Pakistan in small trucks.
Numerous importers from Pakistan who participate in this atrocious practice not only fail to pay import duties, which cost the national exchequer billions of rupees, but also prevent dollars from entering the country, he said.
When the Afghan Taliban established a transition government in August 2021, the Pakistani rupee was trading at 155, the country’s foreign exchange reserves were $22 billion, and its import bill was $4.5 billion.
According to Boston, today the rupee has fallen to almost 225 in the interbank market and 235 per dollar in the free market.
He claimed that every month, about $3 billion in remittances were sent to Pakistan.
The remittance flows have now decreased to $2 billion.
“Where does this monthly $1 billion go? Because we are paying remittances at 225 rupees for every dollar, this $1 billion per month has become the site of Afghan transit. The hawala/hundi operators are giving those 270 for every dollar,” he said.
He said there are just three major international companies with which the exchange companies have signed money transfer agreements at present.
“We have requested that SBP let exchange companies negotiate partnerships with at least 50 significant global money transfer firms,” Bostan said.
“Exchange companies receive roughly $2 billion in worker remittances each year, and in terms of exporting foreign currency, these companies provided about $3 billion to Pakistani banks last year. The exchange companies are significantly contributing to the stabilization of Pakistan’s reserve, the Pakistani rupee, and the Pakistani economy by relinquishing it in the interbank market,” he said.
“If the government gives us an agreement with 50 international money transfer companies, the exchange companies can bring $7 to $8 billion to Pakistan annually.”
