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Smuggling of US dollars to Afghanistan harming Pakistan’s economy: currency dealer

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  • About $2bn goes to Afghanistan in form of official, unofficial trade.
  • Both Afghan, Pakistani traders are involved in this activity.
  • Afghan transit trade, smuggling burdening Pakistan’s forex reserves.

KARACHI: The Pakistani currency is under pressure owing to the ongoing political unrest in the country and the smuggling of US dollars to Afghanistan, The News reported Tuesday citing foreign exchange dealers.

“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.

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, said Bostan, adding that these factors 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 that why should they pay a 200% 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 costs 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 Bostan, 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 sight of Afghan transit. The hawala/hundi operators are giving those 270 for every dollar,” said the chairman. 

Bostan said there are just three major international companies with which the exchange companies have signed money transfer agreements at the 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 stabilisation 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 transfers companies, the exchange companies can bring $7 to $8 billion to Pakistan annually.”

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Pakistan suffers a loss of millions due to inoperable airports.

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The Pakistani economy is strengthening and trending in the right direction, according to Federal Minister of Finance and Revenue Senator Muhammad Aurangzeb on Thursday.

Speaking at the Pakistan Saudi Arabia Business Forum, Aurangzeb stated that the goal of the government was to support the private sector rather than engage in commerce. His goal was to encourage business-to-business (B2B) trade and investment, thus he welcomed the delegation from Saudi Arabia.

Within the last 12 to 14 months, the minister saw a considerable improvement in macroeconomic stability. With the help of foreign exchange reserves sufficient to cover two months’ worth of imports, Pakistan steadied its currency, decreased its current account deficit to less than $1 billion, and produced a primary surplus.

Strong remittances, expanding exports, and a drop in inflation from 38% to 6.9% have all contributed to the consolidation of these benefits, according to Muhammad Aurangzeb. Companies have also profited from the insurance rate reduction.

Even if Pakistan’s credit rating has improved, more work needs to be done to bring it up to at least a B-. Both on the debt and equity sectors, he claimed, institutional flows were returning to the nation.

As the International Monetary Fund (IMF) board approved an extended program for the nation, the Islamabad Stock Exchange set a record high.

He stated that the IMF program will implement structural reforms in addition to ensuring macroeconomic stability for the long run.

The government of Pakistan remains committed to structural changes, sustainable growth, and tax reform, as stated by Muhammad Aurangzeb.

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Pakistan’s economy is getting better, according to Muhammad Aurangzeb

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The Pakistani economy is strengthening and trending in the right direction, according to Federal Minister of Finance and Revenue Senator Muhammad Aurangzeb on Thursday.

thus,Speaking at the Pakistan Saudi Arabia Business Forum, Aurangzeb stated that the goal of the government was to support the private sector rather than engage in commerce. His goal was to encourage business-to-business (B2B) trade and investment, thus he welcomed the delegation from Saudi Arabia.

Within the last 12 to 14 months, the minister saw a considerable improvement in macroeconomic stability. With the help of foreign exchange reserves sufficient to cover two months’ worth of imports, Pakistan steadied its currency, decreased its current account deficit to less than $1 billion, and produced a primary surplus.

Strong remittances, expanding exports, and a drop in inflation from 38% to 6.9% have all contributed to the consolidation of these benefits, according to Muhammad Aurangzeb. Companies have also profited from the insurance rate reduction.

Even if Pakistan’s credit rating has improved, more work needs to be done to bring it up to at least a B-. Both on the debt and equity sectors, he claimed, institutional flows were returning to the nation.

As the International Monetary Fund (IMF) board approved an extended program for the nation, the Islamabad Stock Exchange set a record high.

He stated that the IMF program will implement structural reforms in addition to ensuring macroeconomic stability for the long run.

The government of Pakistan remains committed to structural changes, sustainable growth, and tax reform, as stated by Muhammad Aurangzeb.

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Remittances from Workers

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In September of this year, the State Bank of Pakistan reported that remittances from overseas Pakistanis amounted to 2.8 billion dollars, reflecting a 29% increase compared to the remittances received in September of the previous year.

The SBP reports that, with a cumulative inflow of 8.8 billion US dollars in the first quarter of the financial year, workers’ remittances increased by 38.8 percent compared to the first quarter of the previous year.

Remittance inflows in September 2024 were primarily derived from Saudi Arabia at $681.3 million, the United Arab Emirates at $560.3 million, the United Kingdom at $423.6 million, and the United States of America at $274.9 million.

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