SBP rules out rupee devaluation

State Bank of Pakistan (SBP) Saturday said that the federal government has no plan to devalue Pak rupee against the dollar. During a meeting with the representatives of Exchange Companies Association of Pakistan (ECAP), State Bank Governor Ashraf Mehmood Wathra also committed adequate dollar supply as per demand for maintaining exchange rate at a reasonable level. For last few days, the dollar rate against PKR is witnessing an upward trend on a variety of rumours.
On Saturday morning the dollar was being traded at Rs 104.20 in open market. The sudden changes in the exchange rate forced the central bank to hold a meeting with the representatives of exchange companies to discuss various issues relating to exchange companies, particularly exchange rate.
The meeting was conducted by SBP Governor Ashraf Mehmood Wathra and attended by President ECAP Sheikh Allauddin, General Secretary ECAP Zafar Paracha, President Forex Association of Pakistan, Malik Bostan, Haji Haroon, Nasir Yusuf and Sheikh Mureed Hussain. During the meeting, the governor SBP expressed concern over the sudden increase in the exchange rate and asked exchange companies for compliance of rules and regulations. He also made it clear that federal government has no plan to devalue Pak rupee against the dollar in the next fiscal year budget to be announced next month. He said there is no shortage of the greenback in the domestic money market and adequate dollar supply is available with the State Bank to deal with the rising market demand.
"On behalf of State Bank, National Bank of Pakistan Exchange Company and Habib Bank Limited Exchange Company will provide dollars to exchange companies as per their demand from Monday onwards," Wathra said. However, he warned exchange companies against speculation asking them to determine the dollar rate through market mechanism and support the economy. He expressed concern over the recent rising of spread between the interbank and open currency market rates and stressed on exchange companies to narrow the gap.
The ECAP representatives informed the meeting that rumours like devaluation of Pak rupee and demand for foreign payment created a massive demand in the open currency market, resulting in some erosion of PKR against the dollar. They said that although exchange companies were fully motivated to fulfil the market demand, however they might require some additional supply to avoid speculation. They assured SBP that the dollar will lose its value gradually from Monday and likely to be traded between Rs 102 to Rs 103.
During the meeting, the ECAP demanded of the SBP to allow them to make agreements with the foreign money transfer firms as they believed that it is a major hurdle in the inflow of dollar in the country. The governor SBP ensured the ECAP members that he would consider the recommendations made by exchange companies.