In Karachi, traders are attempting to re-establish trade links with Dubai amidst ongoing instability following a US-Israel attack on Iran that transformed the United Arab Emirates (UAE) into a war zone. Zafar Paracha, General Secretary of the Exchange Companies Association of Pakistan (ECAP), revealed plans for two flights departing from both Karachi and Lahore tonight bound for Dubai. These individuals are yet to be confirmed or explained by authorities.
Dubai is a global financial hub where hundreds of Pakistani companies operate under favorable tax exemptions not available in Pakistan. The UAE ranks second after the United States as Pakistan’s largest trading partner, with a trade volume of $10.1 billion last fiscal year (FY25). A flight from Lahore is scheduled to leave at 3:30 AM for Dubai, carrying foreign currencies including Saudi Riyal and UAE Dirham for conversion into dollars.
The resumption of these trade links could mitigate significant economic losses for both nations if halted further. ECAP Chairman Malik Bostan highlighted the accumulation of $50 million in non-dollar foreign currencies, indicating potential for re-establishing trade with Dubai and converting them back to dollars upon return. The chairman also mentioned an expected rise in remittances from overseas workers during Ramadhan, whose absence due to ongoing conflict might lead to a decrease in available foreign exchange.
Meanwhile, State Bank of Pakistan reported a surge in foreign exchange reserves by $87 million, reaching $16.30 billion as of the week ending February 27th. This comes alongside overall liquid foreign reserve levels at approximately $21.43 billion, including $5.134 billion held by commercial banks.
As Ramadhan approaches and remittances typically increase by 20%, both buyers and sellers seem to have withdrawn from the open market due to the absence of overseas workers during this period. The impact of the ongoing conflict on trade relations underscores the volatility in economic operations, particularly affecting those reliant on foreign exchange flows.