Nationwide Arrest of Eight Individuals for Unlawful Currency Dealing in Pakistan
Pakistan Crackdown on Illegal Currency Dealers Boosts Rupee Stability
The Federal Investigation Agency (FIA) in Pakistan has launched a nationwide operation targeting unlicensed currency dealers and informal money transfer systems such as hundi and hawala. Since late July 2025, the crackdown has led to the arrest of at least 290 suspects, the recovery of over Rs800 million ($2.83 million) in local and foreign currencies, and the sealing of many illegal shops, particularly in the southern and southwestern regions like Karachi, Quetta, Gwadar, and Chaman.
The operation, which followed a meeting between Pakistan’s Inter-Services Intelligence (ISI) and representatives of the Exchange Companies Association of Pakistan (ECAP), is aimed at curbing illicit foreign currency trading, money laundering, and terror financing facilitated by these illegal networks. The rupee's decline to a 22-month low (Rs284.97 per US dollar) had been a growing concern, and the operation aims to address this issue.
Initially, the crackdown contributed to a slight appreciation of the rupee, with the interbank rate improving to around Rs282.72 by August 1 and a narrowing gap between open market and official rates. However, challenges remain. As of early August, a parallel illegal market appears to persist where the dollar trades higher than official rates, importers face difficulty accessing dollars due to tighter controls and prioritization by banks, and market analysts believe sustained rupee appreciation is unlikely given underlying economic conditions and dependence on global US dollar trends.
Despite these challenges, the crackdown has helped stabilize the rupee somewhat. The rupee remained "relatively stable" between Rs282 and Rs283 this week, despite earlier market expectations it could strengthen to Rs278-280. The State Bank of Pakistan (SBP) reported that the rupee appreciated following the crackdown.
The clampdown has also helped close the gap between the official and black market exchange rates, which is a crucial requirement of Pakistan's agreement with the International Monetary Fund (IMF). Under a $7 billion bailout agreement with the IMF, Pakistan is required to keep the difference between official and parallel market rates below 1.25 percent.
The FIA has conducted "hundreds of intelligence-based operations" since January, initiating legal proceedings against those identified as violators in accordance with applicable laws. The FIA has denied that these operations were "prompted by specific directives" from the ISI.
Authorities face a real challenge in implementing sustainable economic policies that lessen the need for such interventions and ensure the currency's long-term stability. The rupee remains vulnerable to global currency shocks and illegal financial outflows due to high import bills exceeding $58 billion. Financial data firm Tresmark projects the rupee could weaken again to Rs284 in the next three months.
Analysts say the long-term outlook remains uncertain and dependent on broader structural reforms. The FIA's efforts are a step in the right direction, but the rupee's long-term weakness appears driven by structural issues, meaning that while the crackdown helps, the rupee may only briefly strengthen before pressures persist.
- The operation launched by the Federal Investigation Agency (FIA) in Pakistan, aimed at curbing illegal foreign currency trading, has its roots in the country's economy, particularly the instability of the rupee.
- A significant part of the FIA's operation has focused on the eastern regions like Karachi and Gwadar, demonstrating the extent of the illegitimate business in those areas.
- The East and Saudi Arabia's finance and business sectors might take note of Pakistan's crackdown on illegal currency dealers, as it might influence similar measures in other regions combating economic instability.
- The Pakistani authorities' efforts to reduce terror financing through illegal networks may attract attention from the general news sector, as it sheds light on crime-and-justice issues.
- Despite the FIA's success in stabilizing the rupee, industry experts predict a possible future weakening of the currency, emphasizing the need for broader structural reforms to ensure long-term stability.
