SBP will withdraw condition of 10 percent dollar-surrendering

In order to enhance the dollar supply in open currency market, the State Bank of Pakistan (SBP) on Tuesday gave the assurance that it would withdraw condition of 10 percent dollar surrendering by the Exchange Companies in the interbank market. The SBP convened a meeting of Exchange Companies to discuss the various issues particularly exchange rate.
The meeting was chaired by Ashraf Mahmood Wathra Governor State Bank of Pakistan and attended by Saeed Ahmed Deputy Governor SBP, Muhammad Ali Malik Executive Director SBP, Irfan Ali Executive Director SBP, Zafar Paracha General Secretary Exchange Companies Association of Pakistan (ECAP), Malik Bostan President Forex Association of Pakistan (FAP) and other representatives of exchange companies.
The meeting discussed the gaps in rupees between open and interbank market. Governor SBP expressed concern over the rising exchange rate in the open currency market and said that there is no shortage of US dollar in the country and sufficient quantity is available to fulfil the domestic requirement of all type of foreign exchange needs.
While, sufficient dollar stocks are available, there is no reason of higher dollar rate in the open market compared to interbank market, he added. He said that presently there is some Rs 4 difference in the US dollar rate of open and interbank market that is directly hurting the home remittances inflows. Currently, dollar is being traded at Rs 108.60 in open currency market compared to Rs 104.40 in the interbank market.
During the meeting exchange companies suggested that in order to further enhance the dollar supply in the open currency market SBP may withdraw the condition of 10 percent dollar surrendering into the interbank market for next two months.
According to participants, the governor SBP has been agreed with this suggestion and assured that the condition to surrender 10 percent in the interbank by the exchange companies would be withdrawn shortly on those currencies which are exporting through Exchange Companies. The exemption will be for a limited period to enhance the dollar supply in the open currency market, he added.
During the meeting Wathra also asked exchange companies to get dollar from SBP in case of shortage. Zafar Paracha of ECAP and Malik Bostan oof FAP has confirmed that SBP has assured to exempt exchange companies for dollar surrendering for two months.
Malik Bostan said that due to rumours of Rs 5000 cancellation, sudden UD dollar demand in the open currency market has been created. Presently, dollar demand in about $10 million par day as against the supply of $5-6 million per day including home remittance and foreign inflows, of which dollar rate is increasing in the open currency market.
He informed that meeting that Exchange companies are bringing some $4 million per day against the exports of currencies, while some $3 billion per day arrives on account of home remittances. He assured that with support of measurers being taken by SBP dollar rate will reverse to Rs 106 in open currency market in next two months.