Dollar flight: SBP chief spills the beans

ISLAMABAD: State Bank of Pakistan Governor Yaseen Anwar has said that around $25 million are smuggled out of the country every day ($9 billion annually) in briefcases through country’s three major airports – a statement that hints at the presence of drug barons and indicates the volume of black money moved from and within Pakistan.

“Some $25 million are flowing out of the country in briefcases through Karachi, Lahore and Islamabad airports,” said Anwar on Tuesday while recording a testimony on reasons behind the massive devaluation of local currency against the US currency in front of the Senate Standing Committee on Finance.

Awami National Party’s Senator Haji Adeel had flagged the issues of smuggling of dollars and money laundering.

The amount that is annually smuggled out of the country is far larger than what the country will borrow from the IMF under a three-year $6.7 billion bailout package. The capital flight through illegal channels speaks volumes about the country’s administrative and governance affairs and underscores the presence of smugglers, drug barons and existence of a huge black economy.

According to country’s leading expert in narco-terrorism and the global heroin economy, Dr Ikramul Haq, large parts of the black market needs are met from the proceeds of the drug dealings. He said the drug racketeers were using Dalbandin-Iran-Turkey route to supply drugs to Europe and were bringing in cash, luxury goods and arms into the country.

Dr Haq further explained that this cash was then sold in black markets and those who wanted to whiten these funds converted the rupee into dollars, which were then shifted to safe havens via Dubai. He said the Federal Investigation Agency (FIA) officials, posted at the airports, were also involved in this dirty business.

Dr Haq said drug barons also remitted their money through banking channels and the Pakistani authorities did not even ask questions about the source of remittances. He further disclosed that counterfeit dollars were also available in Pakistani markets.

Dr Haq’s statement on dirty drug money being used appeared to carry weight as the total formal flows were not even sufficient to finance annual import bill. The country is receiving about $14 billion in remittances and another over $25 billion in export receipts. As against about $40 billion receipts, the total annual import bill is over $44 billion. The difference is bridged either from SBP reserves and borrowings from international lenders.

The SBP governor said that the central bank was trying to control the smuggling of dollars and would soon sign a memorandum of understanding with the FIA. He also said that reports of suspicious transactions were monitored regularly.

“People from the US treasury come every month to monitor transactions, but they cannot pick anything except some transactions taking place at Chamman and FATA,” Anwar said.

He said there were flaws of enforcement and convictions in the country’s anti money laundering laws and to plug these amendments were proposed in anti terrorism act.

In last few days, the rupee significantly shed its value against the US dollar, putting a question mark on the role of the SBP. Anwar disclosed that Finance Minister Ishaq Dar was in touch with him when the rupee was depreciating – a statement that confirmed that the SBP did not enjoy operational independence.

“We intervened in the market by taking certain steps , apart from other measures that were taken,” the governor disclosed in response to a question whether the SBP used foreign currency reserves.

The committee chairperson Nasreen Jalil said SBP could not satisfy the parliamentary panel and its performance remained poor.

“When the currency is attacked no central bank can control the damage,” the governor insisted.


Published in The Express Tribune, October 2^nd, 2013.