Muhammad Zafar Paracha, General Secretary of the Exchange Companies Association of Pakistan (ECAP) has said to Bloomberg that nearly $5 million is smuggled to Afghanistan daily, and it plays a major role in the depreciation of Pakistani Rupees.
“Apparently the flow of international cash aid and the smuggled dollars into Afghanistan markets have helped Afghani to remain stable against the United States Dollar,” Paracha said.
Paracha has said to Bloomberg that the Central Bank of Afghanistan auctions $17 million on a weekly basis, whereas Afghan markets need $10-$15 million on a daily basis. Khurram Schehzad, Chief Executive Officer of Alpha Beta Pakistan says that Afghanistan markets manage the shortage of USD through smuggled dollars from Pakistan.
While rejecting claims, Hasib Noori, the spokesperson of the Afghanistan Central Bank said that Afghanistan has enough dollar reserves to maintain the value of the local currency and support the economy.
The cash aid transferred to Afghanistan through the United Nations is converted to Afghani and this is how the dollar is added to central bank reserves. Additionally, customs taxes are collected in dollars, which is a main source of revenue for the Taliban regime.
As per the findings of Bloomberg, the exchange rate of $1 to 124.18 Afghani from last year has reached 89.96 Afghanis now. This is the strongest monetary reaction against USD worldwide. Meanwhile, the Pakistani rupee depreciated by 37% during this period, the biggest drop against the dollar globally.
Bloomberg states that Afghan traders export coal to Pakistan, they exchange Pakistani rupees for the dollar and then transfer it to Afghanistan through local money transfer companies. Furthermore, an Afghan trader said that the Taliban have ordered traders to import the dollar instead of the Pakistani rupee.
Meanwhile, the ban on transactions in the Pakistani rupee in Afghanistan and not allowing people to take away more than $5000 with them have helped Afghani to remain stable for the past year.