Amid dollar crisis, Pakistani importers head to gray market for transactions

Extreme flooding may no longer be a problem for Pakistanis, but acute food shortages and drying up foreign exchange reserves have left Pakistani food importers vulnerable to gray market payments.

Read also : WHO sounds alarm over disease in flood-affected areas in Pakistan

Under the gray market, products are traded in markets not authorized by manufacturers. Many Pakistani importers of food from Afghanistan and Iran now rely on the gray market for their payments as they are not allowed to buy dollars from banks or exchange companies.

Read also : Pakistan floods: A third of Pakistan under water, the worst floods in its history

Due to heavy rains and extreme flooding, many of his crops were destroyed. This has led the country to face a severe shortage of tomatoes, onions, potatoes and other food items.

Read also : Inflation in Pakistan hits highest level in 47 years before full impact of floods

To deal with the growing food shortage in the country, the Pakistani government has allowed the import of these foodstuffs from neighboring countries. However, the government has made no provision to provide dollars to make payments on these imports.

Currency dealers and importers told PTI that they were asked to go on a barter system with their Afghan and Iranian counterparts by exporting food items available in Pakistan. A barter transaction is the exchange of goods or services, in exchange for other goods or services.

It was found that import deals were possible in local currencies with Kabul due to the presence of Afghans in Khyber Pakhtunkhwa, Peshawar Chamber of Commerce and Industry sources told PTI.

But Afghan exporters are still interested in US dollar payments. They also asked to make payments through Dubai to benefit from the Hundi or Hawala systems. In Hawala systems, two people can perform a monetary transaction without actual movement of money. It is an informal fund transfer system.

This is the main reason why most importers make payments to Afghan sellers in dollars or via Dubai, said Malik Bostan, a prominent foreign exchange trader at PTI.

“The government has not arranged dollars for imports from Kabul while importers are not allowed to buy dollars from exchange companies or banking channels. This is the case with both Iran and Afghanistan,” Bostan said in a report by the Dawn newspaper. He said that in both cases, dollars from Pakistan are being sent abroad while “we really need it”.

Zafar Paracha, another currency dealer, said Afghan currency is only available in Peshawar where exchange or buying and selling is possible in Pakistani and Afghan rupees.

As the Pakistani currency continuously loses its value due to economic problems, most Afghan exporters are unwilling to trade in Pakistani rupees.

“It is the illogical decision of the government not to provide dollars for imports from Iran and Afghanistan when the devaluation of the rupee is now a permanent feature,” Parasha remarked.

As the government has made no provision for the transaction of import money, traders have to resort to other channels, Zafar Paracha said. According to exchange companies in Karachi, Afghans are absent from the currency market, but their rate is the highest in the region.

(With PTI entries)

Catch all the trade news, market news, breaking news and latest updates on Live Mint. Download the Mint News app to get daily market updates.

More less

To subscribe to Mint Bulletins

* Enter a valid email

* Thank you for subscribing to our newsletter.

Post your comment

About the author