Pakistani Rupee is constantly under pressure due to political uncertainty, tension in Pak-US relations and rumors about Rupee devaluation.
Once again Pakistan’s economy is seeing Dollarization. On the other hand, the State Bank of Pakistan assured that no devolution is under consideration.
A meeting was held at State Bank of Pakistan (SBP) to review the Dollar’s price in the open market. SBP executive director for Foreign Exchange, Irfan Ali Shah, presided the meeting. President Forex Association of Pakistan, Malik Bostan, and other office bearers attended the meeting.
Irfan Ali Shah said that there is no truth in the rumors circulating about Rupee devaluation. Neither SBP nor the government is considering it, both are on the same page.
He added that there is a huge gap between interbank and open market Dollar prices. Open market offers 2 percent better price for Dollars. And due to this gap, workers’ remittances are declining because people are sending money from non banking channels.
It is alarming that in the open market Dollar price has reached Rs. 107.50. Due to a rate gap between open and interbank markets, worker remittances are seeing a decline. During October, worker remittances received were at $1,290 million. It is the lowest amount received during the current year.
Irfan said that the open market should shorten the price gap and instead of the 2 percent price gap, it should be 1 percent. This will help divert remittances from non banking channels to official channels. SBP has excess Dollars and if exchange companies need them, we are ready to supply on swap basis.
Malik Bostan said that there is political uncertainty in the country and in financial management due to Finance Minister’s corruption cases. Economic experts are openly saying on media that the currency needs to be devalued. After the US President’s statement against Pakistan, the Rupee is tumbling.
“Dollarization has started in the country. If people have 100,000 Rupees, they wish to buy Dollars. During the last 3 months, exchange companies have sold $800 million.” Malik Bostan said.
In my opinion, Rupee must be strong and stable. Forex Association is ready to help SBP in this regard. In a few days open and interbank market rate gap will be reasonable.
Malik Bostan suggested that SBP must stop foreign exchange bleeding. Every year 80,000 luxury cars are imported and this costs $1.6 billion to the exchange reserves. The government or SBP should take a step in this regard and impose import duty.