Following the US and Europe’s decision to deny the Taliban administration access to billions in foreign reserves, Bloomberg reported that millions of dollars are being smuggled into Afghanistan from Pakistan every day, helping to bolster the country’s struggling economy.
The story quoted Muhammad Zafar Paracha, general secretary of the Pakistan Exchange Companies Association, a group of 26 currency dealers, as saying that traders and smugglers were carrying as much as $5 million across the border every day.
Without a doubt, the currency is being smuggled, Paracha remarked over the phone. This firm is now quite successful.
In August 2021, the Taliban retook Kabul after 20 years, and the US and Europe withheld more than $9 billion in reserves held by the Afghan national bank out of concern that the money would be used for terrorism.
The US agreed to release half of it under pressure from the UN to boost the economy, but once the Taliban forbade Afghan women from going to school or working, they postponed this.
Afghanistan is still in terrible shape, and things are becoming worse for human rights there 17 months later.
The UN has issued a warning that over 50% of the population will experience severe hunger over the long winter. However, the dictatorship is managing to get by thanks to funding from its neighbour.
According to Khurram Shehzad, CEO of Alpha Beta Core Solutions Pvt Ltd., a financial consulting firm in Karachi, “Afghanistan has around a $10 to $15 million requirement on a daily basis.” According to him, Pakistan is where almost half of this comes from.
The central bank controlled by the Taliban, Da Afghanistan Bank, has enough cash on hand to sustain the economy, according to spokesman Haseeb Noori.
Some of it is provided by the UN, which has been donating roughly $40 million in weekly humanitarian aid since last year.
Torek Farhadi, a former adviser to the International Monetary Fund in Washington, claimed that the UN genuinely supports the Afghan currency by giving dollars to the markets and purchasing afghanis in exchange.
“The UN and other sources, like dollar smugglers, really stimulate demand for afghani.”
The afghani has had one of the best years of any currency in the world, rising versus the dollar by around 5.6% through Monday.
After falling to an all-time low of 124.18 in December 2021, a few months after the Taliban regained control, the value of the Afghani has since increased to around 89.96 per $1.
One of the biggest falls over that time has been the rupee’s about 37% loss against the US dollar.
It had its largest one-day plunge in at least 20 years in late January as the crisis-hit government began to loosen its control over the currency rate in an effort to secure much-needed loans from the IMF.
Foreign reserves in Pakistan decreased to $3.09 billion in the week ending January 27, the lowest level in nine years, as a result of devastating floods, rampant inflation, political unrest, and economic hardship.
Officials from Afghanistan’s finance ministry claim that the smuggling really got off in the middle of last year after Afghanistan expanded coal exports to Pakistan, which is an energy-starved nation.
The issue is Pakistan’s “flawed” immigration, trade, and border regulations, according to Paracha of the Pakistan currency traders’ union.
Every day, he claimed, thousands of individuals cross the border illegally. And many of them had cash on them.