KARACHI: The food importers, especially vegetables, from Afghanistan and Iran have been relying on the grey market to make payments since they are not allowed to buy dollars from banks or exchange companies, Dawn has learnt.

The country has been facing an acute shortage of tomatoes, onions, potatoes, etc after floods destroyed crops pushing up prices to unprecedented levels across the country.

This situation has forced the government to immediately allow imports of these foodstuffs from neighbouring countries to bridge the supply and demand gap but it has not made any arrangements for the provision of greenbacks to make payments against these imports.

Quite interestingly, the importers were asked to enter into barter deals with their Afghan and Iranian counterparts by exporting food items available in Pakistan.

Sharp rupee devaluation is hampering trade with neighbours in local currencies

Sources in the Peshawar Chamber of Commerce and Industry told Dawn that import deals in local currencies are possible with Kabul as Afghanis are available in Khyber Pakhtunkhwa.

However, the sources maintained that the Afghan exporters usually ask for US dollars and insist to pay cash or make payments through Dubai. For Dubai payments, the hundi or hawala system is used.

Malik Bostan, a leading currency dealer, said most importers are making payments to Afghan sellers in cash dollars or through Dubai. “The government did not arrange dollars for the imports from Kabul while the importers are barred to buy dollars from the exchange companies or banking channels. This is the case with both Iran and Afghanistan,” explained Mr Bostan.

He said in either case dollars from Pakistan are being sent abroad while ‘we need them badly.’ The Afghan currency is available only in Peshawar where exchange or buying and selling is possible in Pakistani rupees and Afghanis, said Zafar Paracha, a currency dealer.

He maintained that Afghan exporters are not ready to sell their goods against Pakistani rupees since the local currency is facing sharp devaluation on a daily basis.

“It’s government’s illogical decision of not providing dollars for imports from Iran and Afghanistan while the devaluation of rupee is a now a permanent feature,” remarked Mr Paracha.

Exchange companies in Karachi said Afghanis are not available in the currency market while its rate is the highest in the region. One US dollar is equal to 88 Afghanis which is the highest rate compared to Pakistan, Bangladesh and India.

The Afghan government can maintain a high exchange rate as Kabul exports only a few goods like coal and some fruits and vegetables. Since a regular barter system is available, the imports from Tehran will need only a few payments in cash dollars but not in rupees.Currency dealers said the imports from Afghanistan and Iran encouraged dollar smuggling while helping the grey market to expand their business.

Published in Dawn, September 18th, 2022