By The Alleged $235 Million ‘Heist’ by Pakistani Banks
Pakistan’s Senate Standing Committee on Economic Affairs recently criticized the State Bank of Pakistan (SBP) for being too lenient on commercial banks involved in a massive PKR 6,500-crore (roughly $235 million) scandal. These banks allegedly took advantage of the country’s foreign exchange crisis in 2022 by inflating fees for opening letters of credit (LCs) during import transactions.
Manipulation During Pakistan’s Forex Crisis
In 2022, Pakistan faced a severe economic crisis, with foreign exchange reserves dropping below $8 billion, barely enough to cover a few weeks of imports. The country’s economy was already struggling with high inflation and a rapidly depreciating rupee. Amid this crisis, banks allegedly overcharged businesses desperate for U.S. dollars to complete essential imports like food, fuel, and raw materials.
How Banks Profited from Desperate Importers
Letters of credit (LCs) are crucial in international trade as they guarantee payment for imports. In normal circumstances, LC fees reflect currency risks, but during the crisis, with the Pakistani rupee’s value plummeting, some banks saw an opportunity to inflate these fees. Importers had no choice but to pay the exorbitant charges, which further strained their businesses and raised costs for consumers.
The banks reportedly exploited the widening gap between the Pakistani rupee and the U.S. dollar, making huge profits while businesses and consumers struggled. This manipulation worsened inflation and deepened the economic crisis, making it harder for ordinary citizens to access essential goods.
SBP’s Weak Response Sparks Outrage
Lawmakers are demanding tougher penalties and a thorough investigation, arguing that the fines imposed—PKR 140 crore—were too small in comparison to the billions allegedly pocketed by the banks. The SBP’s failure to act quickly and decisively to prevent this exploitation has come under fire, with the Senate calling for stronger regulatory measures.
