KARACHI: The Exchange Companies Associa­tion of Pakistan (ECAP) reported the dollar rate in the open market on Wednesday as Rs107.30-60 while the interbank rate the same day was Rs105.38-48.

The higher open market rates encourage illegal transaction of remittances through the hundi and hawala system.

Recently, National Bank President Saeed Ahmed said remittances were facing their biggest challenge from the illegal system of hundi as a large number of overseas Pakistanis were using it due to lack of proper information.

“There are several reasons for the dollar appreciation, but the main problem is political uncertainty” said ECAP General Secretary Zafar Parach.

He said the negative financial indicators that reflect the growing problem of foreign exchange reserves and increasing payment problems were also putting pressure on the exchange rate while reports of devaluation of the local currency are an additional reason.

He said the increasing gap in dollar prices between the two markets can redirect remittances to illegal channels so people can avail the higher conversion rate.

Remittances, which are an important lifeline for the economy, witnessed a steep fall of 34 per cent in September from August. The decline was termed alarming by currency dealers.

“Demand is high, most of the supplies in the market are consumed the same day, which is why the dollar is getting higher prices,” said Anwar Jamal, a currency dealer in the open market.

Within last couple of weeks, the dollar gained Re1 to Rs1.30 in the open market.

The dollar was traded at Rs106-Rs106.30 on Sept 26 and the recent price was Rs107.30-60.

The interbank market did not reflect the change visible in the open market. The interbank market, more closely monitored by the State Bank, showed an increase of three paisa during the last couple of weeks.

Published in Dawn, October 12th, 2017