Pakistani currency chief blames dollar spike on smuggling to Iran, Afghanistan

The recent rise in the U.S. dollar's value against the Pakistani rupee is being driven by renewed currency smuggling operations, according to Malik Muhammad Bostan, chairman of the Exchange Companies Association of Pakistan.

Bostan made the remarks during a meeting with Inter-Services Intelligence Director General (C) Maj. Gen. Faisal Naseer in Islamabad. The discussion focused on the rupee’s depreciation and underground networks disrupting the formal currency market.

Bostan said smuggling rings are moving U.S. dollars and other foreign currencies into Iran and Afghanistan. In Pakistan’s major cities, he said, agents lure customers away from legal exchange companies by offering higher rates. These customers are then taken to undisclosed locations, where foreign currency is bought at black market prices, reducing the dollar supply to authorized counters.

He also cited new tax regulations from the Federal Board of Revenue (FBR). These rules impose taxes on sellers for cash transactions exceeding PKR 200,000. Bostan said many non-filers are avoiding banks and turning to black market dealers to keep their identities hidden, further increasing dollar demand.

To address the issue, Bostan urged the government to offer a tax exemption for cash-based foreign currency purchases up to $2,000. He said this would align with the State Bank of Pakistan’s current policy and reduce pressure on the rupee.

Maj. Gen. Naseer responded positively, according to Bostan, and immediately directed law enforcement to begin a crackdown on currency smugglers. Bostan said that by Wednesday, many smuggling networks had gone underground.

Following intelligence-based raids by the Federal Investigation Agency (FIA), the dollar’s open market rate fell from PKR 288.60 to PKR 288. The interbank rate dropped from PKR 285 to PKR 284.80. Bostan predicted that continued enforcement could push the dollar down to PKR 270 or even PKR 250.

He advised the public not to buy dollars now and urged those holding foreign currency to sell before rates drop further. “The real value of the rupee should be around PKR 250,” he said.

Bostan added that the State Bank has built up reserves of $20 billion by purchasing $9 billion from the interbank market over the last nine months. With the central bank halting further purchases, he said, dollar pressure should ease.

He expressed hope that with public cooperation, the rupee would strengthen and Pakistan’s economic stability would improve.