KARACHI: The State Bank of Pakistan (SBP) on Tuesday exempted moneychangers from surrendering a certain percentage of imported dollars to banks.
The SBP has been showing concerns about the appreciation of the dollar in the open market. Its officials held a meeting with representatives of the exchange companies and asked them to bring down the dollar rate.
“Moneychangers were bound to surrender 10 per cent of imported dollars to banks. The SBP has temporarily lifted this condition,” said Exchange Companies Association of Pakistan Secretary General Zafar Paracha.
The meeting was chaired by SBP Governor Ashraf Mahmood Wathra.
Dollars are imported against the export of foreign currencies to Dubai. Local demand for dollars has been rising while short supply from Dubai has aggravated the situation.
Moneychangers said the SBP’s decision will improve the supply of dollars and bring down its rate in the open market. The dollar rate is about Rs109 in the open market and Rs105 in the interbank market.
Mr Paracha said the governor promised to help moneychangers by increasing the supply of dollars to meet their needs. He said the price difference in open and interbank markets has widened to Rs4 per dollar, which is attracting speculators and illegal traders.
“The import of dollars has been reduced to just $3-$4 million per day although it had been about $8-$10m per day until a few months ago,” said Malik Bostan, president of the Forex Association of Pakistan, who also participated in the meeting.
He said the import of $3m along with remittances sent by overseas workers amounted to about $6m per day. With demand of roughly $10m a day, the daily shortfall is approximately $4m, he added.
“Short supply is one of the main reasons for the dollar appreciation in Pakistan. The fear of the cancellation of Rs5,000 notes still exists, which is forcing Pakistanis to convert their holdings into dollars, resulting in an increase in their demand,” said Mr Bostan.
Expectations about the cancellation Rs5,000 notes in Pakistan grew after India cancelled its higher denomination notes. A resolution in the Senate calling for the cancellation of Rs5,000 banknotes to curb corruption reinforced such concerns.
Mr Bostan said the import of dollars has fallen drastically during the last three months. The import of dollars against the export of foreign currencies to Dubai was about $250m in October 2016, which fell to $140m in December.
The SBP also assured moneychangers that commercial banks will pay dollars if they have the greenback in their accounts. Banks would refuse to give dollars to moneychangers against the inflows from abroad, which was another reason for short supply in the open market.
According to moneychangers, the SBP promised punitive action against banks in case they refuse them cash payments. They quoted the SBP governor as saying that banks have enough liquidity to meet their demand.