Millions of dollars are being smuggled from Pakistan into Afghanistan every day, providing some support for the squeezed economy after the U.S. and Europe denied the Taliban regime access to billions in foreign reserves. But for Islamabad, the outflows are exacerbating a rapidly developing economic crisis.
Traders and smugglers are bringing as much as $5 million across the border daily, according to Muhammad Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan, a 26-member body of currency dealers. That more than covers the as much as $17 million that Afghanistan’s central bank injects into the market each week.
The illicit flows show how the Taliban are evading sanctions after their 2021 takeover of the country. For Pakistan, it’s contributing to the depletion of foreign reserves and adding to the downward pressure on the rupee as the currency tumbles to record lows and the economy teeters on the edge of collapse.