Aamir Qureshi—AFP
The Exchange Companies Association of Pakistan (ECAP) on Monday blamed the rupee’s deterioration against the U.S. dollar on the government’s negligence in countering the smuggling of the greenback to Afghanistan and the “fake import” of dollars.
Addressing a press conference in Karachi, ECAP Chairman Malik Bostan said this was the primary reason for the decline in Pakistan’s foreign exchange reserves. Recalling that when the Taliban returned to power in Afghanistan last year, the dollar was trading at Rs. 155 and Pakistan’s reserves stood at $22 billion, he said the past year had seen the country’s reserves sink to record lows and the dollar was now fetching Rs. 225 in the interbank market. The unhindered flow of the American currency to Afghanistan has created a crisis for Pakistan, he stressed.
Claiming that $15 million “legally” left Pakistan for Afghanistan daily—based on Islamabad permitting each person to take $1,000/daily and a roughly estimated 15,000 regular travelers—he urged Islamabad to raise the issue with Kabul on an urgent basis. Unofficial estimates, he said, suggested around $2 billion goes to Afghanistan from Pakistan.
Alleging that Afghanistan was facilitating this dollar flight through its policies, he said two months back Kabul had passed a law barring anyone from keeping more than half a million Pakistani rupees and was charging any offenders under anti-money laundering laws. Instead, he said, Kabul had directed all Pakistani currency to be converted into dollars or other foreign currencies. “For 42 years, Afghans have been trading in Pakistani rupees. They have hundreds of billions of Pakistani rupees. But now they are buying dollars from Pakistan at any cost. They will siphon off the entre dollars from Pakistani markets,” he warned.
According to the ECAP chief, the first quarter of the ongoing fiscal year saw 15,000 containers leave Pakistan for Afghanistan without paying any import duties. This, he said, was much higher than last year’s figure of 3,000 containers in the same quarter. At the same time, Pakistan imports coal, vegetables, dry fruits and other minerals from Afghanistan, costing $20-25 million per day.
Alleging that traders—Afghan and Pakistani alike—were bypassing import duties by accepting payments through hundi/hawala, he said this was achieved first sending products to Afghanistan from our port and then returning them to Pakistan via trucks.
Bostan lamented that unlike Islamabad, Kabul had managed to maintain its dollar rate at 88 Afghani because they refused to print any new notes unless they received dollars against them.
Noting that commercial banks were buying $120-$130 million from exchange companies monthly for credit cards, he said this, too, had been impacted by the government slashing the annual per card spending limit to $30,000. Noting that exchange companies annually import $3 billion through export of other foreign currencies against remittances of $2 billion, he claimed that this could be raised to $7-8 billion if the government allowed the inking of agreements with 50 foreign companies for remittances compared to the 3 presently utilized.