system
Given the following post, respond as if you're commenting on Reddit:
human
How could smuggling gold into a country with a struggling currency negatively impact its economy?

I've just read an article which states that Sri Lanka is losing up to USD $30 million per month in foreign exchange, and cites gold smuggling as one cause of that. As a result of that, passengers are being forbidden from wearing 24k gold while traveling in or out of the country by plane.

I understand why smuggling gold OUT of the country could be harmful, but what economic harm could come from smuggling gold IN? Presumably people are smuggling gold so that they can sell it for fiat currency. I would think that exchanging their less valuable, inflated currency for a more tangible asset like gold, which holds its value and could be exchanged for more valuable foreign currency, would be an overall positive for their economy.
gpt
Smuggled gold is income being generated that isn't being taxed, that is also in turn cutting into the profits of the legitimate gold trade for that country.

So the government is losing tax income and apparent GDP. This devalues the strength of the currency because the government that backs it is losing value via the aforementioned.