KARACHI: Pakistan’s Federal Investigation Agency (FIA) has arrested at least eight suspects in nationwide raids since last week, it said on Saturday, in a crackdown on illegal foreign exchange businesses in the country’s southern and southwestern regions bordering Iran and Afghanistan.

The arrests followed a July 22 meeting in Islamabad between a senior official of the military-run Inter-Services Intelligence (ISI) and representatives of the Exchange Companies Association of Pakistan (ECAP). The interaction took place amid growing concern over the rupee’s decline, which last week fell to a 22-month low of Rs284.97 against the US dollar.

Following the meeting, the FIA began operations targeting illegal currency dealers, including operators of hundi and hawala, informal money transfer systems that operate outside official banking channels. While commonly used for remittances, these systems are also prone to abuse for money laundering and terror financing.

Raids were conducted in Karachi, Quetta, Gwadar and Chaman.

“The FIA, acting on credible source reports, conducted raids targeting illegal foreign exchange traders and hundi-hawala operators,” the agency said in response to written questions from Arab News.

It denied that these operations were “prompted by specific directives” from the ISI.

According to State Bank of Pakistan (SBP) data, the rupee appreciated following the crackdown and closed at Rs282.72 in the interbank market on August 1. In the open market, the currency traded between Rs284.62 and Rs285.30, according to ECAP.

The South Asian nation’s currency had been under consistent pressure in recent months, declining over 2 percent against the dollar since January despite a stabilizing economy, including a $2.1 billion current account surplus during the last fiscal year.

With import bills exceeding $58 billion, the rupee remains vulnerable to global currency shocks and illegal financial outflows.

The FIA said it has conducted “hundreds of intelligence-based operations across the country from January to July,” arresting at least 290 suspects and recovering over Rs800 million ($2.83 million) in local and foreign currencies, including US dollars and Saudi riyals.

Authorities have also filed 213 police reports related to black market activities.

“These operations aim to curb unlawful financial practices and ensure compliance with relevant laws,” the agency said. “Upon identifying violations, the FIA initiates legal proceedings against those involved in accordance with applicable laws.”

Pakistan operates a multi-tiered currency market, with the official interbank rate often diverging from the open market and the unregulated “grey market,” where many hawala operators function.

Under a $7 billion bailout agreement with the International Monetary Fund (IMF), Pakistan is required to keep the difference between official and parallel market rates below 1.25 percent.

“This initiative [of launching crackdowns] has also helped to close the gap between the official and black market exchange rates, which is a crucial requirement of Pakistan’s agreement with the IMF,” said Qazi Owais-ul-Haq, a currency trader at Arif Habib Ltd., a Karachi-based brokerage.

Haq added the clampdown has helped reduce market speculation and illegal foreign currency outflows, boosting the rupee’s standing.

“The pressure on the currency market has eased, and many exporters are now beginning to repatriate their earnings, which is further supporting the rupee’s position,” he said, citing ECAP officials.

Financial data firm Tresmark reported the rupee remained “relatively stable” between Rs282 and Rs283 this week, despite earlier market expectations it could strengthen to Rs278-280.

“We expect currency rates to remain range-bound this month,” the firm said, though it projected the rupee could weaken again to Rs284 in the next three months.

Still, analysts say the long-term outlook remains uncertain and dependent on broader structural reforms.

“The real challenge for authorities will be to implement sustainable economic policies that lessen the need for such interventions and ensure the currency’s long-term stability,” Haq added.