KARACHI: The surplus liquidity instead of going into banks is chasing dollars in the wake of tax on transactions and withdrawal of money.
The government, which preferred to tax the already taxed money in this financial year, shocked depositors, traders and others who have to deal with banks for payments or withdrawal on a regular basis. Even the salaried class will have to pay tax on their already taxed salary.
Dealers in the currency market said surplus money was not going to banks for deposits.
Instead, it has started flowing towards the open currency market for dollar buying.
“The dollar was traded as high as Rs103.20 in the kerb market on Saturday. Demand for the currency is still high,” said Anwar Jamal, a currency expert and dealer. The greenback has been above Rs103 for more than a week now.
Inflows of foreign currencies normally remain very high during Ramazan as thousands of overseas Pakistanis who return home to celebrate the holy month and Eidul Fitr with their families bring hard currency with them. Even those who prefer to stay abroad send higher amount of money to their families.
At the same time, Zakat and charity funds are also sent back home during the holy month.
Ramazan is also the month of highest remittance inflows in Pakistan which suppresses the dollar demand in the market, lending strength to local currency. Before Ramazan, the dollar crossed Rs102 in the inter-bank market and started heading towards Rs104 in the open market.
The State Bank of Pakistan (SBP) intervened and announced to provide the dollar at Rs103 through the National Exchange Company. It was considered that the central bank set Rs103 as base price for the dollar in the open market. However, the US currency fell even below Rs103 the very next day after the announcement.
Now, the dollar has become attractive again despite no demand for Umrah or summer vacations.
Currency expert said traders and others who have surplus money are buying dollars instead of depositing them in banks. There could be an alternative payment system through dollars.
The government has imposed a tax of 0.6 per cent on cash withdrawal from banks if the sum of money is Rs50,000 or above. The government also imposed tax on transactions.
Some trade and industry associations in Punjab have announced to demonstrate against these taxes on Monday and Tuesday.
The salaried class, the most tax-compliant segment of the society, also comes under this tax.