Economic vigilance

LAHORE: We live in despair and hope. Most of the time, we think our problems are incurable, then we see authorities taking stern action on some irregularities, and our hopes rise, only to be dashed when those actions are abandoned abruptly.

Our authorities know the ills of our economy, and they also know the solution but mostly stop short of taking action because of political weakness or fear of backlash from vested interests. In the recent past, the authorities somehow mustered the courage to take action on many fronts, which include money laundering, smuggling, and misuse of Pakistan-Afghanistan trade. These actions did have a salutary impact on our economy as the rupee stabilized despite the suspension of foreign inflows and stagnant inflows. Smuggled items worth billions of rupees were confiscated, including huge quantities of fabric and Iranian petrol and diesel. The zero-rated Afghan transit goods were unloaded in Pakistan, depriving the country of huge revenues. The government slapped duties on those items at Karachi port that were to be refunded back to the Afghan government.

These actions look corrosive to the bureaucrats as these irregularities were done with their connivance and earned them a lot of money. However, since the actions had the complete support of those wielding power, the actions were taken as suggested by the powers that be.

Dozens of money changers, hundi operators, and individuals were arrested on charges of money laundering. The rupee, which was declining on a daily basis against the dollar, started recovering rapidly from over Rs320 to Rs270.

There was optimism that the rupee would settle at Rs240 if the vigilance became permanent and rules were strictly observed. The bureaucrats, after a while, started relaxing as their regular incomes were jeopardized. They found another way of stabilizing the rupee – through import compression. The authorities that matter are no longer worried about the rupee going out of hand. This has compromised our growth.

The money launderers are back in the game. The hundi-hawala business is now the norm. Importers are sending money to their suppliers for under-invoicing, the smugglers are back in business. The Afghan currency, which came under pressure after the action, is now stronger than it was at the time when the action was started. Had money laundering been controlled (which can be, as the early action showed), the quantum of under-invoicing and smuggling would have drastically reduced.

In the early days of action, thousands of liters of diesel and some Iranian petrol were seized on a daily basis from various areas of the country, including Lahore, Sheikhupura, Gujranwala, Karachi, and Hyderabad. The smuggling was down to a trickle. Now the smuggling has reached such a level that even the Oil Marketing Companies have started protesting.

By some accounts, now petrol is also being smuggled along with diesel and is equivalent to 20 percent of Pakistan’s daily requirement. When smuggling flourishes, terrorist activities also go up, which is currently happening in Pakistan.

It is indeed criminal that we let illegal activities flourish that are hurting our existence, particularly when we have the ability and capability to eliminate them. Unfortunately, personal greed has a priority in our society over the national interest.