KARACHI: Currency dealers deposited a record $192 million in banks last month, reflecting surplus supply of US dollars in the open market.

“Exchange companies at times deposit up to 70 per cent of their dollars stock in banks due to surplus supply and low demand,” Forex Association of Pakistan’s President Malik Bostan, who finalised the data for September, said on Tuesday.

“On average, they deposit $30m to $40m per month in banks. But in September they deposited a record $192m,” he said.

The exchange rate has been stable for the last few weeks due to low demand and surplus availability of the dollar.

The surplus is due to a State Bank of Pakistan’s (SBP) facility that allows currency dealers to bring dollars from Dubai directly in their accounts. This not only saves time but also reduces cost of import to the minimum level compared to import through commercial banks.

The facility is set to expire on Oct 15 (tomorrow), while currency dealers are in contact with the State Bank to extend the deadline.

The government pays 25 Saudi riyals on remittances of $100 — or about Rs6 per US dollar. The cost of remittances is much higher than the import of dollars through currency dealers. “We helped the government save Rs1.2 billion alone in September,” said Bostan.

He said the import of the greenback by currency dealers and surplus dollars in the market, which are ultimately deposited in banks, helped increase reserves of commercial banks. The country’s reserves have now touched $20bn, but it attracted criticism because major part of the reserves was borrowed.

Despite surplus supply, the US currency did not fall in both inter-bank and open markets. The exchange rate has set its value at around Rs104.40.

Moreover, currency dealers said the fact that the dollar is being traded at the same rates in both the markets shows there is no need to devalue the local currency as being demanded by exporters.

Although exporters are once again seeking rupee’s devaluation, it has never worked to improve exports, particularly in case of Pakistan.

On pressure of exporters, the local currency was devalued by 2.5pc in September and the dollar price was established at over Rs104 in the inter-bank market.

However, exports have not shown any improvement. Despite record reserves, the country has been facing widening trade gap, and ultimately current account deficit. It is remittances that allow the debt-laden country to keep afloat as without them it would be unable to service its increasing external debts.

Published in Dawn, October 14th, 2015

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