Dollar cap removed to hit grey market
After the Exchange Companies Association of Pakistan (Ecap) lifted an unofficial exchange rate cap on Wednesday, the rupee lost value versus the dollar. Ecap reports that at 4:35 p.m., the USD was trading at Rs243 in the open market, down 0.93 percent from yesterday’s close of 240.75.The interbank market price was Rs230.89 when it closed.
Separately, Ecap General Secretary Zafar Paracha declared that discussions between Ecap representatives and State Bank of Pakistan (SBP) Deputy Governor Inayat Hussain were productive. The State Bank complied with all of our demands, which included lifting the restriction.
According to Paracha, the SBP further ordered commercial banks to give money to exchange businesses. He committed to eliminate the grey market by bringing the USD-PKR exchange rate in the open market to the “real” rate.
Later in the day, Paracha told Dawn.com that even after the cap was lifted, the rate being given on the open market was still considerably lower than the rate on the black market. However, he continued, the association would progressively increase fees.
According to the general secretary of Ecap, exchange companies only sell dollars to “legitimate purchasers,” travellers, and people who need the currency to pay for their schooling or medical expenses.
“The availability of dollars is quite constrained. Neither do banks possess any currency. The SBP vice governor gave us assurances during our meeting. The supply line is fixed, and the grey market contracts because the government ordered banks to hold significant amounts of cash so that [exchange businesses] can buy from them, Paracha continued.
The sharp reduction in the central bank’s foreign exchange reserves, which have dropped to $4.6 billion, has had a significant negative impact on the exchange rate. The rupee has been declining, according to currency analysts, “despite being regulated” by the SBP.
Due to a lack of dollars, the difference in rates between the interbank and open markets has grown dramatically, severely harming the economy and directing remittances away from the official banking system and onto the black market.
According to some experts, the lack of dollars could lead to gasoline and diesel restriction in the upcoming two to three months, which would affect trade, industry, and even the agricultural sector, which depends on diesel during the harvesting season.
Following a meeting of the organisation on Tuesday, Ecap Chairman Malik Bostan released a statement in which he said that the decision to cap the dollar rate had turned out to be “negative.” “Instead of declining, the dollar rate grew, leading to a shortage of dollars on the market and the emergence of the grey market.”
He also bemoaned the fact that people had to turn to the black market in order to purchase dollars for travel or to pay for their medical and educational costs.
He continued, “Once the grey market shuts down, the dollar rate will start to fall. I want to inform the public that the shortage is being brought on by exchange companies’ inability to obtain dollars from anywhere.
Dollar cap removed to hit grey market and rupee lost its value against Dollar.
