KARACHI: The State Bank of Pakistan (SBP) has decided to cut the import requirement of cash dollars to 35 per cent against the export of foreign currencies, creating fears about a shortage of the greenback in the open market.

The central bank issued a circular on Monday that asked exchange companies to bring only 35pc cash dollars as opposed to 100pc against the export of foreign currencies to Dubai.

“It has been decided that exchange companies can continue to import cash dollars against the export of permissible foreign currencies. However, total imports of cash dollars shall not exceed 35pc of total exports of permissible foreign currencies during a month,” said the circular.

The SBP circular did not mention how the remaining 65pc dollars will be imported. But exchange companies said the remaining amount will be transferred through bank accounts.

“This is a surprising decision. It will hurt the market mechanism since the inflow of dollars has been restricted,” said Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha.

He said the SBP had earlier allowed the 100pc import of cash dollars against the export of foreign currencies for the sufficient availability of dollars in the open market.

“The new decision has reversed the process. We will again depend largely on banks to provide us with dollars,” he said, adding that the 65pc import of dollars through the banking channel means it will take three to four days to reach the exchange companies. At present, 100pc cash becomes available within the same day.

However, Forex Association of Pakistan President Malik Bostan said the decision was taken after discussions with the exchange companies and would reduce the cost of import.

“The cost of the physical import of dollars against the export of foreign currencies is high due to insurances and other expenses,” he said.

He said banks have enough deposits of dollars. There is no possibility of a delay by banks or a shortage of dollars in the open market, he added.

“The remaining 65pc of imported dollars will be available at the earliest,” said Mr Bostan.

The exchange companies were also exempted from the condition to deposit 15pc imported cash to banks. The decision was taken to ensure the maximum availability of dollars in the open market.

Some currency experts fear that there will be a shortage of dollars after the new decision, with the price difference between open and banking market rates recording a hike.

Published in Dawn, January 2nd, 2018