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Economic Undermining
These covert operations have a pervasive effect on Pakistan’s economy. They distort exchange rates, leading to currency devaluation. As a result, imported goods become more expensive, which can fuel inflation, burdening the common citizen. Furthermore, such activities undermine the effectiveness of monetary policies and erode confidence in the financial system.
The report highlights that this not only results in a loss of government revenue but also fosters a shadow economy that is challenging to track and regulate. In a time when Pakistan faces significant fluctuations in exchange rates, a firm commitment to eradicating smuggling in key sectors becomes crucial for the nation’s economic recovery.
The Importance of Governance
Rashid Ashraf, CEO of ACE group of companies, emphasized that governance plays a pivotal role in addressing these issues. Improved governance can lead to an overall enhancement in the financial and economic environment, providing stability to Pakistan’s financial markets and fostering economic growth.
Ashraf also stressed the necessity of advanced surveillance techniques and technologies to secure Pakistan’s physical borders and crossing points. Pakistan shares long borders with Iran and Afghanistan, and a sea border with Gulf countries, making effective control of smuggling of physical dollars and oil imperative.
Dollar Smuggling and Iranian Oil
The report reveals that Pakistan loses approximately $150 million each month due to dollar smuggling, resulting in an alarming annual loss of around $2 billion. Similarly, smuggled Iranian oil commands a significant share, estimated at over 30% of Pakistan’s diesel market. Annually, this costs the government over $1 billion.
Gold Smuggling
Gold smuggling poses another significant challenge. Out of the substantial gold market value of Rs2.2 trillion ($7.1 billion), only 1.32% or Rs29 billion ($94.5 million) is officially declared to tax authorities. This underreporting is due to an annual smuggling of approximately 80 tonnes of gold into the country, out of a total annual consumption of 160 tonnes. With regularisation, this market could contribute a minimum of $500 million annually to government revenues.
Impact of Import Bans
The report also highlights the unintended consequences of import bans. Despite their well-intentioned implementation, these bans have given rise to a shadow economy. Smuggling, misreporting, and product substitution have become common methods to bypass import restrictions, leading to disruptions in economic activity and a potential increase in unemployment figures.
Control of Payments for Imports
Ashraf underscored another critical issue where payments for imports to Pakistan are made from the UAE. UAE-based companies facilitate these payments to other countries on behalf of Pakistani companies and importers. To address this, he suggested collaboration between the Pakistani government, the State Bank of Pakistan (SBP), and their UAE counterparts to ensure that these payments are made within Pakistan’s borders, thus contributing to the country’s foreign reserves.
Conclusion
In conclusion, Pakistan faces significant economic challenges posed by illicit activities that drain its economy of billions of dollars annually. Addressing these issues requires a combination of governance improvements, advanced surveillance techniques, and international cooperation. As Pakistan endeavors to stabilize its economy and foster growth, tackling these clandestine operations is essential for its financial future.
