19 May 2004	Wednesday	28 Rabi-ul-Awwal 1425

KARACHI, May 18: The rupee has lost half a per cent value vis- a-vis the US dollar in the inter-bank so far during this month: In the open currency market it has lost more than one per cent value against the US unit.

The rupee declined to 57.74 a dollar in the inter-bank market on Tuesday from 57.45 at end-April shedding 29 paisa in a little more than two weeks. In the open currency market it came down to 58.60 for spot selling from 57.95 at end-April losing 65 paisa in just 18 days.

Senior bankers say the rupee has been on the decline primarily due to higher external debt payments by the government as well as by the corporates. The increase in import bill particularly due to higher petroleum prices in the international market amidst slower growth in exports is also taking its toll on the health of the local currency.

Money changers and heads of foreign exchange companies say the local currency has come under pressure due to currency smuggling. The central bank has succeeded in containing the rise of the dollar through moral persuasion i.e. by persuading banks not to indulge in unnecessary dollar buyings on assumption that the US unit would rise further.

"Had we not been very vigilant the dollar would have risen more sharply during this month," claims an official of the Exchange & Debt Management Department of the SBP.

But the efforts of the central bank to keep the dollar from rising too sharply in the open market are yet to produce desired results. "The dollar is moving up in the open market primarily due to currency smuggling and SBP cannot stop this," said the SBP official.

The official who declined to be named said gold importers have rallied on dollars to finance import of the yellow metal thereby pushing up the price of the greenback. "Besides not all exchange companies are reporting correctly their third currency exports and inflows of cash dollars against the same."

This has created an artificial shortage of dollars in the open market. The central bank is contemplating a ban on cash import of dollars against export of third currencies to stop this practice.

Gold importers do admit that import of gold has increased in the past few weeks and that this has had an impact on the open market exchange rates because they have to buy foreign exchange for gold imports from the open currency market.

But what they do not admit is that most of the gold being imported into Pakistan is being supplied to neighbouring India to pay for the smuggled goods particularly electronic items of daily use.