KARACHI: The fast devaluation of local currency against the US dollar forced finance minister to hold meeting with currency dealers and to discuss the situation with the State Bank Governor on Friday.
While the minister, Ishaq Dar, expressed concern over rising spread between Inter-bank and Kerb market rates recently, currency dealers demanded immediate ban on gold imports that siphoned off dollars from the open market.
The meeting was held at the State Bank in the presence of the Governor of State Bank to develop a strategy to deal with the fluid situation of the exchange rate regime.
Gold imports increased by 500 per cent since February this year. Most of this gold is smuggled to India which has increased import duty on gold. Pakistan has no duty on gold imports.
Since banks do not provide dollars for gold imports, importers buy dollars from the open market.
“In February, gold import was 280 kg per month which is now 1400 kg per month,” said Malik Bostan, Chairman, Exchange Companies Association of Pakistan (ECAP).
This high import increased the dollar demand from $20 million per day to $40 million per day while the size of the market is estimated around $20m.
The minister discussed the matter with the State Bank, but no decision was taken on Friday.
Another meeting with the representatives of exchange companies is scheduled with the governor, State Bank on Saturday.
The government and the State Bank came under fire over steep fall of local currency against the international currencies, including the US dollar.
In the first 50 days of the government, rupee lost 4.5pc in the open market and 2.4pc in inter-bank against the US dollar.
The dollar price in the open and inter-bank market developed a gap of over Rs3 per dollar which threatened inflow of remittances through banking channels while reviving the illegal channels, like Hundi and Hawala system.
During the meeting, exchange companies showed their apprehensions over the recently issued circular by the State Bank which put tough conditions on dollar transactions. Bostan said the condition that each buyer of $10,000 requires NTN number would simply encourage people to deal with the people doing illegal trading of currencies.
“For all sale and outward transactions of $10,000 or above (or equivalent), National Tax Number (NTN) of the customer will be obtained by the exchange company which will be mentioned on the transaction receipt along with CNIC/Identification Number of the customer,” said the SBP circular issued on July 23.
“The finance minister at the outset expressed his appreciation of the positive role played by exchange companies in the past for the country and hoped that they would once again remain conscious of their responsibilities in stabilising the exchange rate in support of Pakistan’s economy,” said a press release issued by the State Bank on Friday.
The exchange rate remained erratic in both the markets while the dollar was traded at different rates at different places.
However, inter-bank market seems to have lost patience as it traded dollar as high as Rs101.30. This was the highest price of the greenback in this market so far.