ISLAMABAD: Economists have attributed the widening gap between interbank and open market exchange rate to the prevailing political uncertainty as well as unchecked dollar smuggling to Afghanistan.

Former finance minister Dr Hafeez Pasha and former finance ministry adviser Dr Ashfaque Hassan Khan while talking to Business Recorder on Tuesday concurred that the broadening gap between interbank and open market rate is putting additional burden on forex reserves.

Pasha urged the government to review its trade agreement with Afghanistan as the rupee was being used to purchase dollars; and emphasized that the International Monetary Fund programme should be brought back on track at the earliest, otherwise multilateral and bilateral lenders will stop providing critical funds and disable the government from launching/issuing bonds in the global market.

Rupee remains under pressure, settles at 226.15 against US dollar

Pasha deplored the failure of the finance minister to fulfil reform commitments made with the IMF in the August 2022 Letter of Intent (LoI). Economic conditions were deteriorating day by day with industrial production declining, employees made redundant and foreign exchange reserves fast depleting with the possibility of default, he ended on a sombre note.

Khan contended that the prevailing uncertainty in the country accounts for the wide gap between inter-bank and open market rates with overseas Pakistanis preferring to send their remittances through the informal channel of ‘Hawala and Hundi’, adding that this declining trend was putting additional pressure on the already low foreign exchange reserves. Khan noted that there was a decrease of around 15 percent in remittances, which should be a matter of serious concern.

Copyright Business Recorder, 2022