The ongoing economic crisis in Pakistan is being further exacerbated by the alarming outflow of foreign currency from the country. This concerning situation is fueled by the smuggling of millions of US Dollars into neighboring Afghanistan on a daily basis.
As a consequence, the Afghan Afghani (AFN) has emerged as one of the best-performing currencies in the world over the past 12 months, while the Pakistani Rupee (PKR) has experienced a decline, positioning it among the worst-performing currencies globally. The impact of these illicit financial outflows is twofold. Firstly, it contributes to a shortage of foreign currency reserves within Pakistan, adding strain to an already fragile economy.
Secondly, it has had a significant influence on the exchange rate between the Afghan Afghani and the Pakistani Rupee. As of today, 1 Afghan Afghani is equivalent to approximately 3.28 Pakistani Rupees, reflecting the stark contrast in their respective performances.According to a report by Bloomberg, these unauthorized currency flows are providing a substantial lifeline to the strained Afghan economy.
The influx of US Dollars, which has been denied to the Taliban regime by the United States and Europe, has offered significant relief to Afghanistan’s financial situation. Despite facing international sanctions and restrictions, the country has witnessed a strengthening of its currency, providing some stability and respite amid challenging circumstances.
As Pakistan grapples with economic challenges, the issue of currency smuggling and foreign currency outflows remains a pressing concern. The authorities are actively working to combat these illicit practices, implementing stricter regulations, and increasing surveillance at border crossings. The objective is to curb the unauthorized movement of funds, preserve foreign currency reserves, and stabilize the Pakistani Rupee.
Efforts are also underway to address the root causes of this currency disparity, focusing on improving economic conditions within Pakistan, fostering a conducive business environment, and attracting foreign investment. By bolstering the country’s economic growth and ensuring stability, the government aims to reduce the incentives for currency smuggling and promote a more balanced exchange rate.