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ISLAMABAD: “The crackdown on illegal exchange dealers and envisaged investment inflows from friendly countries has been the major reason for a higher fall in the rupee against the dollar in the open market than inter-bank rate.”

This was stated by former Finance minister Dr Hafeez Pasha while talking to Business Recorder on Tuesday. However, he cautioned that an artificial appreciation of the rupee against dollar would encourage imports, which would, in turn, fuel a trade deficit with negative ramifications on the current account.

Pasha added that in such a scenario it would be difficult for the country to limit current account deficit to $6 billion and as a result, foreign exchange reserves, already under pressure, would deplete swiftly.

Open-market: rupee closes at 297-300 against USD

He further referred to the International Monetary Fund (IMF) projection that Pakistan would have to depreciate the exchange rate by 20.4 percent to maintain the trade deficit at a reasonable level.

The former minister said that due to regulatory weakness and manipulation by exchange companies, the difference between the inter-bank and open market rate widened to 9-10 percent against the 1.25 percent (plus/ minus) agreed with the IMF. He hinted that there could be some negative impact on investment inflows from friendly countries under SIFC.

Chairman Exchange Companies Association of Pakistan (ECA), Malik Bostan told Business Recorder that the crackdown against black market has begun yielding positive results in the market as the local currency has started appreciating against the dollar.

It was the black market that had led to a difference of Rs 30 between the inter-bank and open market, Bostan claimed, adding that if the crackdown continues and the market monitored on a regular basis, the dollar may come down to Rs 250-260. He said that as a result of the crackdown, demand for the dollar declined.

Bostan further argued that the significant difference in the rupee-dollar parity in the open market and inter-bank rate led to a decline in remittances as the remitters naturally preferred the hawala/ hundi mechanism.

Bostan said that he is hopeful that remittances would improve by up to 20 percent if the crackdown against the black marketers continues and regular monitoring was ensured.

Copyright Business Recorder, 2023

Comments

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Tulukan Mairandi Sep 13, 2023 07:44am
Oh. He admitted its artificial
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Faisal Kandhro Sep 13, 2023 09:22am
Why is it artificial? I remember when the country had 3.2B$ in reserves the dollar rate stood at 285. Now that the reserves have more than doubled and supply is improved it's artificial to be on 300 level?
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Usman Sep 13, 2023 09:53am
Pasha wants us ti die. These elite are still crying over same thing when ruppe was 100 to a dollar.Thet are incompetent to increase exports and keep.on repearing the same thing.time to bring back dollar to a 100 ruppe.
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Fahad Sep 13, 2023 10:45am
@Usman, y Atificial and encourage Import Ban all luxury imports like dog and cat's foods, New Zealand's Apple etc.
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Dua Shahid Sep 13, 2023 11:39am
Hafeez Pasha is a psychopath. He always tries to utter some negativity.
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Khalid Sep 13, 2023 11:40am
The main reason for higher "RISE"in the Ruppe..fix this business recorder...
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imdad kolori Sep 13, 2023 12:05pm
isnt this guys spouse the federal minister in the last cabinet , dude could have told her to do something instead of just taking
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Sagar Baloch Sep 13, 2023 12:43pm
He is trying to hint us about the actual and long term issue.he knows how letter of credit crushed the export of Pakistan in terms of import.the rupee is artificial because it is no longer bound between Open Market and International.The Real Cause of Concern is the Investment.SBP is doing his level best to show the fake Dominance of Rupee against dollar because they already prevented Letter of Credits of Major Companies which are responsible for more than 70% of exports.once SBP clears LC's of those companies than Rupee will be on free fall Spree up to 500 PKR.if they don't than Export will die causing a long term Damage to PKR which may exceed 600+ in 3 to 5 years and continue to fall without reaching any stable point.factories and Industries require raw materials for import in order to export products which are stunk for more than 1.5 years.to prevent default they are accelerating the phase of Defaulting.
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Kamran Haider Sep 13, 2023 01:15pm
Its not all about artificial, India is massively selling dollar, as the foundation member of BRICS. Many countries including Saudi Arabia is selling dollar. Globally when BRICS countries will sell dollars, 3rd world countries like us will get some benefits. Including IMF loan payments and sanctions.
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Kamran Haider Sep 13, 2023 01:18pm
@Faisal Kandhro, Brother its nt all about reserves. Foreign debts and withheld payments and advanced securities won't let the currency rates higher. Our liabilities are higher then our capital investments. The demand of every local commodity is Inversely proportional to its supply cause of taxes and unavailability of goods.
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Shahid Khan Sep 13, 2023 04:23pm
We all know it is artificial
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Mubashir Munir Sep 13, 2023 05:07pm
You are also mafia beneficiary c
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Shahid Khan Sep 13, 2023 05:26pm
Elite will buy dollars now and will make money once it shoots
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Ahmed Sep 13, 2023 05:52pm
Speculation in reporting is helping the exchange cos.
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Muhammad Umair Sep 13, 2023 06:13pm
Why not higher custom tarrif on luxury imports including cars , icon mobiles to limit imports.... Why all taxes etc are levied on domestic market, why importers are not targeted to control imports and manager balance 9f payment
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ارشد Sep 13, 2023 06:54pm
بادشاہ تمہارے جیسے لوگ ہمیشہ منفی سوچ کو ہی پروان چڑھاتے ہیں ڈالر اوپر چلا جائے تب روتے ہو نیچے ا جائے تب روتے ہو رونے کے علاوہ اور کون سا کام اتا ہے تمہیں۔
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M mobeen Sep 14, 2023 02:38am
Pilez save a. Bank neam an ... jast time wat call me bank 03004449546
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Riaz Muhammad Sep 14, 2023 07:56am
What Pasha is saying seems true BCS State Bank has restrictions on LCs. Industry can not import required raw materials. Already much of the industry working 20-25% capacity and if Hundi is stopped this 20-25% production will further drop. If economy has strength then industry shall be allowed to import at least 50% of the raw materials compared to 2021-22. So all this is artificially controlled. Must ban illegal flight of Dollar but allow industry to import raw materials
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Abdul sheikh Sep 14, 2023 10:50am
@Faisal Kandhro, These reserve you are talking about are debts which have to be repaid.
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Abdul sheikh Sep 14, 2023 10:59am
What about 24/7 printing of rupee, did anybody notice?
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Abdullah Sep 14, 2023 07:34pm
@Faisal Kandhro, do you think we stopped importing goods after having that number of rsserves. Also, the reserves being depleted were also toppedup by extra sba by IMF which in turn put more pressure on the currency. It had to go up naturally in order to release the pressure.
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Sharjeel rafique Sharjeel Sep 15, 2023 01:52pm
Help me sir
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