January 31, 2002	Thursday	Ziqa’ad 16, 1422

KARACHI, Jan 30: If the IMF succeeds in persuading Kabul to switch over to dollar in preference to its battered and feeble Afghani, it would unfold an uncertain future for Pakistan’s trade with Afghanistan and its participation in the reconstruction of the war-devastated economy.

Addressing a news conference at Afghan’s capital, IMF and World Bank officials said on Tuesday that it would make sense to switch over to the dollar in the short-term. IMF’s fiscal and currency expert Warren Coats said, “it is one of the options we are discussing with the authorities.”

Whereas the impact of “dollar option” for Afghanistan on Pakistan are not crystal clear, currency experts are haunted by the Argentinean disaster and are not sure it is the right prescription.

To quote a currency expert, in the short-term, as long as foreign investment and capital inflows are in the upswing, the going will be good. But once the investors begin to withdraw and capital outflows take place, you would have another crisis like Argentina. Besides, the strength of the dollar would be determined by the robust or ill-health of the US economy and would not reflect the state of the Afghan national economy. “The honeymoon would not last long,” he adds.

Currency experts in Karachi said that the Afghani being quoted at 30,000 to a dollar. The Afghan traders have more confidence in the rupee than their own currency.

They feel safe with the rupee and the informal trade is largely conducted in the Pakistani currency. Recently, the government has allowed official trade in rupee to boost bilateral trade. If Afghanistan opts for dollar as a national currency, the rupee trade is expected to be affected adversely.

According to a National Bank Research report, the unofficial imports by Afghanistan from Pakistan totals $82 million. These consist of items of daily use like rice, wheat, ghee and flour, estimated at $68 million. The largest item in value was rice at $38 million followed by edible oil at $15 million and wheat and flour $14 million.

If these exports were brought into the formal trade, says a leading currency expert, Pakistan’s foreign exchange earnings would definitely go up. But when the foreign trade is conducted entirely in dollars, the purchases for these commodities can be made by Kabul from any source, not necessarily from Pakistan. It may be determined by the sources of its capital inflow and the competitive rates at which these commodities and goods are offered by different countries. It may be difficult to ensure the share of the Afghan market that Pakistan has been able to secure under the Taliban regime.

A World Bank survey estimates unofficial trade of Afghanistan at $1256 million in 2000, unofficial exports at $1080 million, the bulk of which, estimated at $941 dollar went to Pakistan. The unofficial imports of Afghanistan amounted to $176 million of which $82 million worth of goods were imported from Pakistan.

In 1999, Pakistan was the