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Fall of rupee alarms govt

Published Jul 27, 2013 11:08am


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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.

Comments (6) Closed

Habib Rahman Jul 27, 2013 07:06pm

During ppp led govt. Rupee was depreciated by about 60% (from 62 rupee to a dollar to roughly 99 rupee to a dollar) and now in the last 50 days of PML-N govt. rupee on free fall being depreciated another 5%(From 99 to roughly 102) for a total of 65% depreciation of currency.By raising inflation by 65 %,it deprived purching power of people by 65% and the lost of saving by that much.It is not over yet, the worst is yet to come.Democracy is good for politicians to write off their loans, misappropriate the dev. fund and jobs for their loves ones.The illiterate public is the victim not knowing the games of democracy.Just five years ago, Pakistan was one of the fastest growing country with 7% GDP growth, stable currency of 62 rupee to dollar and foreign reserve of 106.4B$ in 2007 with IMF controle.

ahmed Jul 27, 2013 07:43pm

is the meeting to result in rate coming down...

gangadin Jul 27, 2013 08:06pm

"Fall of rupee alarms govt "

Now what? Where was rupee before it fell?

Humayun Zafar Jul 28, 2013 06:07pm

Wrong trade and economic development policies could pull the rupees further down. Look at Musharraf era, his regime continued to hold Rupees at around Rs 60 to a dollar for 9 years.

Mian Ahmad Jul 28, 2013 08:10pm

I think the Finance Minister does not want to understand the underlying reason. It is the imposition of asset tax on net movable assets which is resulting in flight of capital - as had happened in 1998 when the PML-N government had frozen the foreign currency accounts. Taxing the already taxed is not going to help the economy Sir.

umar Jul 28, 2013 08:21pm

If it was a shock for the government. Then shame on that Government who cannot forecast/ foresee upcoming disaster. They had been involved in previous government in one way or the other.