FOR many months now, a persistent rumour has refused to go away suggesting that money belonging to individuals from Pakistan has been invested in the Euro bond auction carried out in September last year.

It is illegal for Pakistani residents to participate in a foreign currency bond auction of the government, and the issue raises serious concerns relating to money laundering.

The rumours have circulated ever since the auction was conducted, often appearing in dodgy TV shows and therefore garnering little credibility. But of late they have resurfaced. Most recently, the Senate Standing Committee on Finance asked the finance ministry about the matter, and the reported answers given by the ministry were unsatisfactory.

The committee has vowed to summon representatives from the State Bank and private banks that were underwriters to the issue and demand greater disclosures from them on the identity of any Pakistani resident whose funds may have been utilised in the auction.

That hearing should take place soon, and the committee must make a forceful effort to follow up on this line of questioning.

What’s more, the rumours also allege that at least a part of the $500m that was raised through that auction was money from Pakistan, fuelling further questions about the utility of the exercise since its prime purpose was to bring foreign exchange into the country.

If the allegations are true, and the fact that they are being raised in a Senate committee hearing says they are more than idle speculation from TV shows, it would mean that money belonging to wealthy Pakistanis has been lent to the government at some of the highest interest rates in the world, at a time when the government could not present a compelling case for why the auction was necessary in the first place, considering reserves were at a record high for that period.

The secretary finance was able to confirm only that the branches of two Pakistani banks, which are barred from participating in foreign currency auctions of the country, did indeed take part in the auction without any legal hitches since they are registered offshore.

It is vital now to get to the bottom of this affair. This set of allegations refuses to subside, and having been raised at the level of a Senate hearing, the government should make a strong effort to put the matter to rest. The implications are highly damaging.

Published in Dawn, February 26th, 2016