Pakistani food importers at mercy of grey market owing to dollar crunch

Karachi, September 18

Pakistani importers of food from Afghanistan and Iran have been relying on the grey market to make payments since they are not allowed to buy dollars from banks or exchange companies.

Pakistan has been facing an acute shortage of tomatoes, onions, potatoes and other food items after floods destroyed crops, pushing up prices to unprecedented levels across the country.

This situation has forced the government to immediately allow imports of these foodstuffs from neighbouring countries to bridge the supply and demand gap but it has not made any arrangements for the provision of dollars to make payments against these imports.

Currency dealers and importers said that the importers were quite interestingly asked to enter into barter deals 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.

Sources in the Peshawar Chamber of Commerce and Industry told that import deals in local currencies were possible with Kabul as Afghanis were available in Khyber Pakhtunkhwa.

However, the sources maintained that the Afghan exporters usually ask for US dollars and insist to pay cash or make payments through Dubai. For Dubai payments, the hundi or hawala system is used.

Hawala is an informal funds transfer system that allows for the transfer of funds from one person to another without the actual movement of money.

Malik Bostan, a leading currency dealer, said most importers are making payments to Afghan sellers in cash dollars or through Dubai.

“The government did not arrange dollars for the imports from Kabul while the importers are barred to buy dollars from the exchange companies or banking channels. This is the case with both Iran and Afghanistan,” Bostan was quoted as saying in a report of the Dawn newspaper.

He said in either case dollars from Pakistan are being sent abroad while “we need them badly”.

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

He maintained that Afghan exporters were not ready to sell their goods against Pakistani rupees since the local currency was facing sharp devaluation daily.

“It’s government’s illogical decision of not providing dollars for imports from Iran and Afghanistan while the devaluation of rupee is a now a permanent feature,” remarked Paracha.

Paracha said they have to resort to other channels government or central bank had not arranged for dollars.

He said in either case dollars from Pakistan are being sent abroad though they are needed badly in the country.

Exchange companies in Karachi said Afghanis are not available in the currency market while its rate is the highest in the region. One US dollar is equal to 88 Afghanis which is the highest rate compared to Pakistan, Bangladesh and India.