Pakistani currency dealers held

Munaf Kalia is at the center of a nationwide investigation

Two directors of a Pakistani currency company have been remanded in custody over allegations that they illegally transferred millions of dollars abroad.

The two directors of Khanani and Kalia International (KKI), one of the biggest foreign exchange companies, were arrested on Saturday.

Their company’s license to trade has also been suspended for a month and its offices have been searched.

Pakistan’s economy is in crisis and the IMF is preparing a rescue package.

Inflation is running at 25%, and there has been a collapse in the value of its stock market and currency.

There are also massive trade and budget deficits, plunging foreign currency reserves and capital flight.

Pakistan’s foreign exchange reserves have dropped

The government in Islamabad needs to find $5bn this month if it is to avoid defaulting on foreign loans.

Officials say that the activities of Munaf Kalia and Javed Khanani – arrested in Karachi and Lahore respectively – may have contributed to a big reduction of the country’s foreign exchange reserves, which have depleted from over $16bn in October 2007 to below $7bn today.

The authorities say the flood of money out of the country has also caused an enormous drop in the value of the rupee. At the beginning of the year it was trading at 65 to the dollar. Last month it fell to a record low of 90 to the dollar.

Few details of the charges against the KKI duo have been released. Investigators have seized a computer which they say may have details of transfers to accounts in the Gulf, Europe and the US.