KARACHI: Foreign currency exports from Pakistan and the subsequent import of dollars against the same fell to just 4 per cent in November, reflecting a grave situation as the country faces declining inflows from other sources.

Currency dealers export foreign currencies except the dollar to Dubai and bring back the greenback against their exports.

Before the current crisis in the currency market, the daily average export of currencies and the dollar imports against it amounted to around $20 million while the monthly average remained $500-600m.

“We lost business in November since no foreign currency is available in the market to export,” Exchange Companies Association of Pakistan Secretary General Zafar Paracha said.

The country has lost about $500m monthly inflows, a huge loss given that the government has been borrowing similar amounts at a high interest rate from the international market.

Supply-demand mismatch in local market deprives Pakistan of foreign currency exports

Authorities concerned held a meeting with currency dealers on Friday in Islamabad to force them to bring down the dollar price.

Currency dealers said on Saturday the greenback lost Rs2 per dollar in two days demonstrating the government’s action and authority.

However, some currency experts raised questions as to why the government delayed its action, which drained out hundreds of millions of dollars from the country.

While the country lost about $500m in inflows against the export of foreign currencies, the smuggling of the dollar from Pakistan has continued for more than a couple of months. The smuggling of gold from Dubai has also been reported. Gold smuggling also absorbed hundreds of millions of dollars, which were sent out from Pakistan through the illegal hawala system.

The smuggling of foreign currencies, including the dollar, rapidly increased in the last two months. However, some currency experts believe that allowing airports other than those in Karachi and Lahore to export and import foreign currencies also fuelled smuggling.

Initially, the export and import of foreign currencies were allowed through the Karachi airport only. Then the Lahore airport and some other airports were also added to the list.

Currency dealers expressed their astonishment that the smuggling of currencies and gold suddenly stopped after Finance Minister Ishaq Dar issued orders on Friday in this regard.

Sources said officials of a foreign airline were taken aback when most of its Dubai-bound passengers from Karachi cancelled their seats on Saturday, forcing it to get the remaining passengers adjusted on another flight.

“It shows the massive number of smugglers that travel to Dubai with illegal money. The order to stop smuggling was immediately imposed, leaving the flight vacant,” said a leading currency dealer with firsthand information about the incident.

In the last decade, Dubai remained the most attractive place for the investment of illegal money smuggled from Pakistan.

Published in Dawn December 4th, 2016