Afghanistan’s Taliban regime has launched an effort to stem the flow of the US dollar back to Pakistan, announcing a curb on the smuggling of gold and American currency.

Dollars were being smuggled out of Pakistan into Afghanistan when Islamabad had pegged the exchange rate at Rs230. With the government interference in the money market ending earlier this month, the value of the US dollar against the Pakistani rupee has climbed to Rs276.

There is a possibility that hoarders will bring their dollars back to Pakistan to reap profits.

The Taliban government issued a declaration on Tuesday to “prevent the smuggling of currency, gold and precious tone from the country.”

The declaration said that anyone leaving Afghanistan from airports could carry only US$5,000 with them while people traveling through land borders could take only US$500.

Thousands of Afghanistan enter Pakistan through Chaman and Torkham border crossing to seek medical treatment.

Taliban have already banned the use of the Pakistani rupee, and other regional currencies, as a legal tender in Afghanistan. The ban was first announced in November 2021, but it is being enforced now.

The statement issued on Tuesday said that only the Afghani could be used as a currency for transactions.

The decree has also prescribed punishment for smuggling US dollars or gold out of the country. Anyone arrested with $1 million may get one year in prison. People found with $100,000 will spend seven days in jail.

Gold and US dollars will be confiscated and deposited with the State Bank of Afghanistan, the decree said.

The Taliban have imposed a ban on bringing “currencies related to the countries of the region” into Afghanistan.

“The prevention of smuggling of currency, gold, precious stones and historical relics throughout the country is the responsibility of the General Intelligence Directorate of the Islamic Emirate, the Ministry of Interior and the Ministry of Defense,” the statement said.

Billions of dollars smuggled from Pakistan

Ever since the Taliban took over Kabul in August 2021, billions of US dollars have been smuggled into Afghanistan from Pakistan, according to the Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan.

Bloomberg reported on Tuesday that dollar smuggling from Pakistan provided a lifeline to the Taliban and helped them the effect of international sanctions while tweaking the Pakistani currency since fall of Kabul.

The Afghani, meanwhile, became one of the best performing currencies.