EDITORIAL: The most recent scare about the economy, especially how complying with IMF conditions, inflated utility bills and forced people out in angry protest, seems to have seriously jolted the government.
And what started as a military-led mission to crack down on illegal movement of US dollars across the Durand Line has expanded into a full-blown crusade against all types of cross-border smuggling.
So much so that the army has made it very clear that any security personnel involved in it would not only be court martialled but also jailed.
This is an essential step because smuggling wouldn’t be possible without collusion of border guards, which of course are part of the armed forces. Yet now that they are going all out, they will first have to plug the two biggest avenues of smuggling into Pakistan. The first is the Afghan Transit Trade (ATT).
Pakistan has long maintained that while it is happy to facilitate its landlocked neighbour in its quest for commercial outreach to the rest of the world, it is also concerned because a lot of exports bound for Afghanistan are routinely smuggled back into Pakistan, conveniently sidestepping customs duties and taxes and bloating the black economy. The trick is to grease the right palms on both sides of the border, reload those items onto trucks and drive right past check posts.
Just last week the commerce ministry briefed the prime minister’s office that ATT increased about 67 percent year-on-year in 2022-23 – from $4.016 billion to $6.71 billion – “which is neither plausible nor understandable keeping in view its (Afghanistan’s) limited exports and other funding sources, especially after imposition of multiple types of sanctions on the interim Afghan government”.
Lately, these items have included fabrics, tyres, black tea, home appliances, toiletries, cosmetics, etc., because of their low volume of formal imports into Pakistan due to restrictions on import of non-essential and luxury goods to preserve forex reserves.
This trend has exposed the government’s measures to keep the current account in check as toothless, cut official revenue and caused considerable harm to domestic industry, which is why this sudden action against smuggling – at least the announcement of one – is long overdue.
The other is smuggling across the Iranian border. While it’s true that poor quality of life in border areas leaves residents with few options to survive other than indulge in illegal petrol trade, this is only one very small part of the bigger story.
Once again it is the big, well-connected fish that use their money and influence to bribe and/or arm twist the security machinery that mans the border to make illegal windfalls. And neither the Afghan nor the Iranian border could be misused and abused to facilitate smuggling without active participation of elements within the security apparatus, which is why the army’s decision to cleanse itself of them will go a long way in cutting both illegal trade and the black economy.
On a broader level, it’s about controlling the flow of illegal goods from the left side of the Indus River, where they cross the border, to the right side where they are used – except Karachi, which is on the left side. And though this racket would have existed, as it has for a long time, it would never have grown so big if the institutions that were created to prevent it weren’t playing along.
That is why all eyes are now on the military as it moves to smash it once and for all. Already, its help in sorting out dollar smuggling and speculation has enabled rupee gains when almost all currencies – definitely all Asian currencies – have lost considerable ground against the greenback.
In fact, the Pakistani rupee is poised to end the year as the world’s best performing currency even though it started it as the worst; all because of the army’s crackdown, which says quite a lot.
By that measure alone, the military’s help is proving invaluable in rescuing the economy. If it can back the rupee’s turnaround with crushing the black economy, which means dishonouring and punishing its own errant officers when it must, then it will do a great service to the country; even if the realisation has come a little late. In fact, it should have come much, much sooner.
Copyright Business Recorder, 2023
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