The State Bank of Pakistan (SBP) Wednesday asked exchange companies to reduce the rising exchange rate gap in interbank and open currency market up to one percent. It had already decided that the gap in exchange rate of interbank and open currency market will not be above one percent or Re 1. Presently, exchange rate in the open currency market surged to Rs 112.70 to the dollar, which is some Rs 2.10 higher than interbank market.
The State Bank called a meeting of exchange companies at the SBP head office to discuss the vibrant changes in exchange rate in open currency market. The meeting was chaired by Syed Irfan Ali, Senior Executive Director, SBP and attended by Muhammad Ali Malik, Executive Director, SBP, Malik Bostan, President, Forex Association of Pakistan (FAP) and a number of representatives of exchange companies.
During the meeting, the SBP officials said on the request of exchange companies, the SBP had already withdrawn restriction on cash import of dollar against the export of permissible currency to increase the dollar inflows in the country and avoid shortage. However, they said that, despite lifting of 35 percent cash import condition on dollar import, the exchange rate in open currency market is still volatile.
During the course of meeting, the SBP officials urged exchange companies to reduce the exchange rate gap in open currency market and bring the gap up to one percent or Re one. They told the representatives of exchange companies to take some urgent measures towards stabilization of Pak rupee to the dollar. "The difference between interbank and open currency market rates should not be of more than one percent," SBP maintained.
Malik Bostan, President, FAP said it is not possible to reduce the gap in open market and interbank dollar rates immediately; however it will be shrunk in next few days with improved supply of the greenback. He said there are several reasons behind higher dollar rate in open currency market. Importers are settling their deals with China as Chinese banks will be closed from February 5 to February 15 due to annual holidays, he said.
In addition, people are buying dollars from open currency market to get benefit of expected amnesty scheme, he added. He also raised the issue of smuggling saying that as per the estimates $10 million are being sent abroad on a daily basis for payment of smuggled goods. It needs to be curbed on an urgent basis to stop the massive outflow of dollar through unregistered network. Bostan also called for new home remittances agreements with foreign companies to facilitate overseas Pakistanis.
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