Smuggling through the Afghan transit trade is making matters worse for Pakistan, which is already losing money quickly in US dollars.
At a press conference, Malik Bostan, the chairman of the Exchange Companies Association of Pakistan (ECAP), stated that roughly $2 billion is transferred from Pakistan to Afghanistan each month through formal and informal channels, smuggling, and border crossings, all of which deplete Pakistan’s foreign exchange reserves.
“Pakistan is currently struggling with issues on numerous fronts, the first and biggest one being the political crisis,” he remarked. Additionally related to it is the current currency crisis.
Bostan claimed that Pakistan’s economy is suffering significantly as a result of the illicit Afghan transit trade. Both Afghan and Pakistani traders participate in this unwholesome activity, which is the path taken by a significant chunk of the money going from Pakistan to Afghanistan.
He pointed out that the hundi/hawala industry grew as a result of the government raising import taxes on luxury products, and he added that the network is extensive and accepts payments through unofficial channels in Dubai, London, Europe, America, Saudi Arabia, and other places.
“Our importers and traders considered that it was unnecessary for them to pay a 200 percent duty to the Pakistani government,” he stated.
Small trucks are used to transport their cargo from Pakistan to Afghanistan and back. He stated that numerous importers from Pakistan who indulge in this atrocious activity not only fail to pay import charges but actively block the entry of dollars.
The PKR was at 155, the foreign exchange reserves were at $22 billion, and the import bill was $4.5 billion when the Afghan Taliban seized power in August 2021. Bostan noted that the rupee has now depreciated to almost 225 against the dollar on the interbank market and to 235 against the dollar on the open market.
Bostan stated that Pakistan used to receive about $3 billion in remittances from expatriates each month, but that amount has since fallen to $2 billion. “Where does this $1 billion go each month? Our $1 billion monthly payment for remittances—paid at 225 rupees for every dollar—has become the focal point of Afghan transit. “Those 270 are being given for every dollar by the hawala/hundi operators,” he continued.
The State Bank of Pakistan (SBP) has been requested to permit collaborations with at least 50 significant enterprises from around the world, according to Bostan, who criticised the small number of money transfer agreements that local exchange companies had inked with important foreign organisations.
He said that exchange companies gave around $3 billion to Pakistani banks by giving up foreign currencies in the regional interbank pool last year, making a significant contribution to foreign exchange reserves, the PKR, and the nation’s economy.
According to the ECAP director, if the government permits exchange companies to work with 50 foreign money transfer companies, they may bring $7-8 billion into Pakistan each year.