Amid a dollar shortage in Pakistan and no cooperation from its central bank, Hawala and Hundi networks are gaining ground in the country, sources told CNN-News18.
Overseas Pakistanis are not using proper channels for remittances, which is the main cause of grey market dealings, they said.
According to SBP, the inflows of foreign remittances into Pakistan declined by 11 per cent during the first seven months (July-January) of fiscal year 2022-2023.
The remittances during the month of January 2023 were recorded at $1.89 billion, compared to $2.18 billion in the same month the previous year, showing a decline of 11 per cent.
Sources said overseas Pakistanis, smugglers, and non-taxpayers are also encouraging the grey markets, by not using the proper channels, not paying taxes/service charges, and using illegal channels of Hawala and Hundi networks to send money in and out of the country for their basic business-trade deals, leisure, healthcare, children’s fees, and remittances.
The deals in the grey market are happening at PKR 290 against one US dollar, they added. The interbank rate on Wednesday was around PKR 262. This means on one single dollar, Pakistan is losing PKR 30.
The administrative measures to control imports are leading to the creation of black and grey markets again, said sources. Furthermore, the failure of customs to stop smuggling is intensifying the problem, they added.
For instance, observers say, US dollars going out of Pakistan means something or some goods coming in, most probably by smuggling, as money is not moving out legally — as country X exported goods worth $1 billion to Pakistan, its official data says it imported only $0.1 billion legally, the other illegal $0.9 billion will be considered money laundering.
These gaps have promoted the return of the Hundi-Hawala networks, where overseas Pakistanis are getting good rates for their remittances, said sources. A large gap in the rates of the interbank and open market has negatively impacted the flow from the official channels, they added.
Recently Bloomberg reported that “Over the past 12 months, Afghanistan’s currency is among the world’s best performing while Pakistan’s (currency) is among the worst. The Afghan currency has appreciated by 5.6% compared to a 36.6% depreciation in the Pakistani rupee in the last 12 months, according to data; traders and other smugglers bring in as much as $5 million a day…that illicit flows help Afghanistan but hurt Pakistan’s economy.” These statistics show the strengthening of the black and grey markets in Pakistan.
According to ground intelligence reports, cash-strapped Pakistan has no mechanism and plan to stop money laundering/terror financing — the TTP and Afghan smugglers are freely moving millions of dollars from Pakistan to Afghanistan, which may be a big lifeline and relief for terrorists and a threat to international peace.
Intelligence officials say the Pakistan government should act according to its promises to the global money laundering and terror financing watchdog FATF before its steps in as after some time this data will be publicly available and may create big problems for the country.
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