Karachi: Despite the rupee remaining fairly stable in the interbank market, the foreign exchange market is facing a severe shortage of the US dollar, leading traders to question the credibility of the mechanism used to ensure greenback availability. . Mian Anjum Nisar, former president of the Federation of Pakistan Chambers, said that the falling rate of the dollar has proved to be meaningless as most of the exchange companies and dealers do not have dollars and the shortage has persisted for almost a week. Commerce and Industry (FPCCI).
He asked the central bank to be more vigilant and take strict action to ensure the presence of the US dollar in the open market. Ismail Sattar, president of the Employers’ Federation of Pakistan (EFP), commented, “Despite the rupee’s strength, there is a widespread shortage of US dollars available to money exchangers and dealers in Pakistan. The situation has frustrated importers as they Unable to buy greenbacks against a better exchange rate. Attributing the shortfall to alternative means of payment used by importers, he said, “The government has greatly discouraged imports of late. , has informally asked banks in Pakistan to refrain from opening any letters of credit (LCs) and discourage them from accepting any forward bookings. on the US dollar,” he said.
“As a result, importers are using alternative means to ensure payments to their foreign partners,” Sattar said. He gave the example of how importers were buying dollars through Afghan transit and other informal channels to make payments because the outflow of dollars was not reflected in the current account deficit (CAD). The former FPCCI president stressed the need for bold steps, especially given the volatile nature of the rupee’s stabilization against the greenback. He pointed out that “currently limited transactions are taking place in the open market compared to the regular daily transactions of up to 60 million dollars, as there are fears that these dollars are being smuggled into Afghanistan.”
Despite the Central Bank’s initiatives, smuggling continues to continue which shows that all government institutions are not on the same page,” he said, urging the government to review its trade and immigration policies with Afghanistan and Iran. Rs. The devaluation was mainly due to a decline in foreign reserves and despite constant assurances from Finance Minister Ishaq Dar that the rupee was undervalued and would soon recover to its real value of Rs 200 to the dollar. Nisar this September. Further highlighting the decline seen in CAD for the third consecutive month.
“It fell to $0.3 billion, less than half of what it was in August. In Q1FY23, CAD declined to $2.2 billion from the $3.5 billion seen in Q1FY22, mainly due to lower imports. A good sign for Asia’s economy, which is already facing dwindling foreign exchange reserves. Ahsan Mahanti, chief operating officer (CEO) of Arif Habib Commodities, observed that “the non-availability of dollars has led to importers There is a big problem for If no respite is given, both essential and non-essential items are at risk. The International Monetary Fund (IMF) program also mandated the State Bank of Pakistan (SBP) to buy dollars from the open market for imports, leading to a shortage.
Banks have helped by avoiding speculation. However, formal channels should support informal channels for stability. Nisar maintained that there must be a clear policy to curb volatility in the exchange market and that “the central bank should be fully prepared to stay ahead of the curve and monitor them more vigilantly.” because they have more information than the average market. players.” Further, the government needs to relax the rules for exchange companies, as stringent procedural requirements were making consumers reluctant to approach the open market. Amid dwindling foreign exchange reserves, Pakistan has faced several exchange rate crises this year and authorities have vowed to crack down on speculators.
The promised action comes in tandem with the wild swings seen by the rupee, which hit a record low in the interbank market, and witnessed its worst monthly performance in July in 50 years. “Sentiments and dollar supply are expected to improve with expected remittances from the World Bank and other lenders,” said Tahir Abbas, head of research at Arif Habib Ltd (AHL), adding that “Im A review of F is also scheduled next month which will open the $1 billion tranche. Moreover, speculation is rife about Prime Minister Shehbaz Sharif’s visit to China next month, it is hoped. Pakistan will get respite regarding external financing.
The former president of FPCCI added that “Ishaq Dar’s return as finance minister created a bullish trend in the currency market, with the rupee gaining nearly 10 percent in less than three weeks, but it It also led authorities to suspect manipulation by banks and exchange companies.” Meanwhile, the State Bank said investigations into alleged manipulation of foreign exchange operations by commercial banks in the country would be completed by early October.
