Pakistan’s Military is Targeting Smugglers and Hoarders

In a surprising turn of events, Pakistan’s currency experienced a significant strengthening against the U.S. dollar in September. This positive development has been attributed to the military leadership’s proactive intervention to combat dollar hoarding and the illegal smuggling of goods, particularly oil, from Iran. Despite the absence of a substantial infusion of cash from the global market, this commendable effort has yielded fruitful results.

After the caretaker government took office in August, the value of the Pakistani rupee plummeted against the U.S. dollar, causing panic in the stock markets and the prices of essential commodities like sugar, rice, and milk to skyrocket. In response to that development, the gap between the interbank and open market values of the dollar increased by about 10 percent, clearly in breach of the country’s recent agreement with the International Monetary Fund (IMF), which only permits a disparity of 1.25 percent.

The top military brass seem to have taken it upon themselves to bolster business confidence and stabilize the economy. The army's commander-in-chief, Lieutenant General Asim Munir, has argued in favor of stringent, coordinated monetary controls to restrain inflation as well as tightened oversight of the nation’s currency exchange system.

Seemingly, the impact of this military intervention goes beyond mere currency stabilization. It sends a strong message that Pakistan is determined to create a conducive environment for economic growth and development. Additionally, it seeks to convey the idea that political instability has passed. There is new hope for sustainable growth in Pakistan’s economy due to the preparations for coordinated monetary activity and an anticipated fresh plan with the IMF in the upcoming months.

These measures have taken on a great deal more significance, especially in the light of reports that the Gulf countries, particularly Saudi Arabia, intend to invest billions of dollars in Pakistan. The Pakistani military has established a specialized task force to address the concerns of potential investors, including finding a solution to the problem of political unrest and providing guarantees to keep the economy on a path toward stabilization.

Despite public opposition, the military-backed caretaker government decided to increase taxes, an extremely unpopular but sensible move, suggesting that absurd subsidies have at least for now come to an end. Despite widespread protests and rallies, the interim government has drastically increased fuel and energy prices, showing that Pakistan will prioritize meeting its financial obligations and inject some sort of fiscal discipline even if it means increasing pressure on its people.

The current political landscape in Pakistan presents a unique situation in which the absence of an elected government has led to a heavy reliance on the military for governance. This has significant implications for various policy changes, including those related to the State Bank of Pakistan’s efforts to regulate exchange firms and combat the black market in currencies.

It is crucial to recognize that without the backing of the military, the success of these reforms becomes uncertain. The State Bank’s attempts to implement stricter regulations and eradicate illicit currency hoarding practices heavily depend on support and cooperation from the military. Regardless of whether it should be the military’s purview, the institution’s involvement is essential in ensuring the effective enforcement of monetary measures in Pakistan.

The current actions taken by intelligence agencies against smugglers and hoarders in Pakistan are not only a response to the immediate threat posed by these activities but also reflect the potential threat that an unstable economy poses to the military as an institution. This involvement highlights the recognition by the military leadership that a currency in free fall and unchecked inflation can develop into a national crisis.

Overall, the actions taken by the military also indicate the broader recognition within its leadership of the potential risks an unstable economy poses to their international commitments. Pakistan has likely made promises with potential investors to ensure a certain amount of economic stability. As long as there is a perception of instability in Pakistan, it can be dangerous for long-term investments and development plans in the country. Therefore, the action is partly driven by the desire to put an end to Pakistan’s impression of instability and image as a state that is falling apart.

It is important to note that while security forces play a role in regulating the economy, they should not be seen as replacing civilian institutions responsible for economic governance. Rather, their involvement should be viewed as complementary, with a focus on addressing immediate threats while working towards long-term stability.

More importantly, the sustainability of taking action against deeply entrenched mafias and vested interests is a complex and challenging endeavor. These powerful groups often have strong interlinkages with traditional political parties, military elites, businesses, and elements within state institutions and the bureaucracy, and will fight tooth and nail to protect their turf.

The Pakistani state must be prepared for a long and arduous battle. It may encounter the limits of both its willpower and ability to dismantle these networks. However, it is crucial to persevere in the face of adversity, as the consequences of allowing these vested interests to continue unchecked could be detrimental to the country’s stability.