If your foreign exchange operates like a black market, you will naturally look for someone who offers a better rate. It is common for currency exchange rates to be better in countries where the market operates illegally. However, the smuggling equation refers to the illegal transfer of currency across borders, which can impact the exchange rate and overall stability of the economy.
How it’s possible?
If we could purchase that 1 USD at 270 PKR in Afghanistan, but we can’t find 1 USD at 280 PKR in Pakistan cities. Then why it’s smuggled to Afghanistan?
It’s possible due to the difference in exchange rates between Afghanistan and Pakistan. If one can purchase 1 USD for 270 PKR in Afghanistan but can only find 1 USD for 280 PKR in Pakistan, there is an incentive for individuals to smuggle dollars from Pakistan to Afghanistan to take advantage of the better exchange rate. The smuggling of currency can result in a decrease in the supply of dollars in the originating country (Pakistan) and drive up its exchange rate, while increasing the supply of dollars in the destination country (Afghanistan) and lowering its exchange rate.
The channels for smuggling money to Afghanistan are not publicly disclosed, but it is often done through informal and illegal means, such as through unlicensed money exchangers, cross-border trade, and personal networks. The statement about the government being helpless in stopping the smuggling may indicate a lack of effective measures to combat the issue. The responsibility for addressing the problem of currency smuggling likely lies with a combination of government agencies, such as the central bank and law enforcement, as well as the public and businesses cooperating with efforts to stamp out the illegal activity. It is a complex issue that requires a coordinated response to address.
