KARACHI: The State Bank of Pakistan (SBP) Wednesday allowed banks to purchase US dollars from interbank for settlement of card-based cross border truncations with International Payment Schemes (IPSs) to reduce the pressure in the open currency market.

Previously, as per the SBP directives, authorized dealers were allowed to purchase USD from any exchange company from settlement of card-based cross border truncations with IPSs such as Visa, MasterCard, etc.

However, now the SBP has decided to allow the $ purchase from interbank market for such payments to facilitate banks. “In view of the representations received from stakeholders, it has been decided to allow authorized dealers (banks) to purchase USD from interbank for settlement of card-bases cross border transactions with IPSs,” a circular issued by the SBP said.

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This facility is initially being provided for two months. As per the SBP’s instructions, these transactions are applicable with immediate effect till July 31, 2023 unless and otherwise notified.

Source said there was huge demand of greenback in the open currency market as not only travelers, students and pilgrims were purchasing US dollar from the exchange companies but banks were also buying dollars for settlement of card-bases cross border transactions with IPSs as there were the SBP’s restrictions on purchase of dollars from interbank market for such purposes.

They said this SBP move will help reduce the pressure on the exchange companies and Pak rupee is likely to appreciate against the USD in the open currency market.

Zafar Paracha, Secretary General, Exchange Companies Association of Pakistan (ECAP) appreciated the State Bank move saying now the demand for USD will be increased in the interbank and decrease in the open market as banks will buy dollars from interbank market for IPSs settlement.

He said the SBP took the right decision at a right time and this will lead to bring down the open market USD rate up to Rs 25. The decision will also help reduce the difference in the price of the dollar in the inter-bank and open market, he added.

Recently, the IMF has also asked Pakistan to settle the foreign exchange market to resume Extended Fund Facility (EFF) bailout package of $6.7 billion.

Copyright Business Recorder, 2023