Black market currency trade, gold smuggling, oil smuggling, and similar illegal activities are costing Pakistan’s economy $23 billion annually, a financial service company, ACE Money Transfer said in it’s latest report. The UK-based company stated that the black market and smuggling of US dollars in major sectors are affecting the struggling nation’s economy by $23 billion per year.
These operations, including black market currency trade, oil smuggling, gold smuggling, import controls, and more negatively impact the economic stability in Pakistan, reported The Express Tribune. These elements distort exchange rates, resulting in currency devaluation, which further boosts inflation as imported goods become more expensive, news agency PTI said, citing the report.
The financial firm’s analysis further noted, “This not only leads to a loss of government revenue but also fuels a shadow economy, making it harder to track and regulate economic activities.” Recently, Pakistan has gone through major volatility in it’s exchange rates, further deepening it’s economic challenges. A strong crackdown on these activities has to some extent helped stablise the interbank rate at Rs 282.62 per dollar. Market experts believe that a strong commitment to removing smuggling from key sectors is crucial to ensure economic recovery for Pakistan.
Rashid Ashraf, CEO of the ACE group of companies, said, “The most important part is governance, if governance is improved, it will lead to an overall improvement in the financial and economic environment and bring stability to our financial markets and help economic and financial growth of the country.”
Ashraf further highlighted the need for advanced surveillance technologies to secure the country’s physical borders, during a conversation with the Express Tribune. He added, “We have a long border sharing with Iran and Afghanistan and then a sea border with Gulf countries. The smuggling of physical dollars and oil must be effectively controlled to prevent the outflow of foreign currencies.”
As per the UK-based company’s report, Pakistan suffers a loss of nearly $150 million per month due to dollar smuggling, resulting in a shocking annual number of around $2 billion per year. Further, the report stated that smuggled Iranian oil now holds a major share at more than 30 percent of Pakistan’s diesel market. About 10 million litres of diesel and 2 million litres of petrol are smuggled on a daily basis into Pakistan from Iran, the report claimed. This smuggled fuel eventually ends up costing the government more than $1 billion annually.
Notably, the Pakistani government has officially banned the import of Iranian fuel products since 2013. However, the report pointed out, that the government mechanism fails to stop the smuggling taking place across the borders due to the huge profits earned by different parties involved in the process.
Another major challenge for the Pakistani economy is the smuggling of gold. The report revealed that from the total gold market value of Rs 2.2 trillion, a mere 1.32 per cent or Rs 29 billion is officially declared to the tax authorities. This gap in reporting comes from an annual smuggling of nearly 80 tonnes of gold out of the total consumption of 160 tonnes.
The report suggested that with proper norms, this market could add up to at least $500 million annually to the government’s revenues. It further underlined the unintended consequences of import bans leading to the boom of a shadow economy, which has disturbed economic activity on a large scale and further has the potential to boost unemployment to astounding levels.