Dollar Shortage in Markets Expected After State Bank’s Latest Decision

The regulations issued by the State Bank of Pakistan (SBP) are likely to create a shortage of dollar bills in the open market.

According to the decision by SBP, exchange companies can now import only 35% of cash dollars against 100% export to Dubai.

The Order

The released circular says:

It has been decided that exchange companies can continue to import cash dollars against the export of permissible foreign currencies.

However, total imports of cash dollars shall not exceed 35pc of total exports of permissible foreign currencies during a month.

Read More: Govt Considering Use of Yuan Instead of Dollar for Pak-China Trade

For example, if a company sends 100 dollars abroad, it can import 35 dollars against it only. Rest of the 65 dollars will be brought in through banking channels. As per previous arrangement, companies were allowed to import full 100% in cash against 100% export.

Zafar Paracha, General Secretary of Exchange Companies Association of Pakistan (ECAP), says;

This is a surprising decision. It will hurt the market mechanism since the inflow of dollars has been restricted.

According to exchange companies, involvement of banks in the process will delay the procedure of providing cash. The companies’ representatives say, it could take 3-4 days to supply the required amount, before this the required money was supplied the same day. Paracha said;

The new decision has reversed the process. We will again depend largely on banks to provide us with dollars.

Shortage or No Shortage?

There is a twist in the tale, Malik Bostan, President Forex Association of Pakistan, says exchange companies were consulted before making the new decision.

This was in benefit of everyone as it will reduce the import cost by a significant amount in form of insurances and other expenses.

Furthermore, exchange companies will be exempted from 15% cash deposit that is applied on imported cash.

Experts say there will be a shortage due to the difference of rates between bank and open markets. Malik Bostan, however, says that banks have enough cash deposits of dollars so this won’t be an issue.

Via: Dawn

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