KARACHI: Reversing its earlier decision, the State Bank of Pakistan (SBP) is reported to have allowed dealers the import of 100 per cent cash dollars against the export of other foreign currencies.

The central bank restricted the cash dollar import to 35pc through a circular on Jan 1 — a move that resulted in a shortage of the greenback in the open market.

The exchange rate surged to a record high of Rs113 on Monday from Rs110.80 since the implementation of the 35pc condition.

This sharp rise in the dollar price forced the SBP to call an urgent meeting with the currency dealers on Tuesday. The central bank asked them to bring down the dollar rate in the open market.

“The SBP has assured us that it will withdraw its decision and allow us to bring 100pc cash dollars against the export of foreign currencies,” Zafar Paracha, secretary general of the Exchange Companies Association of Pakistan (ECAP) told Dawn.

As per the SBP’s earlier decision, currency dealers were to bring back the rest of the amount (65pc) against the export of other foreign currencies through the banking channel.

The involvement of banks in the currency import created serious concerns among the dealers. Some of the top currency traders supported the SBP’s initiative to restrict the import of dollars to 35pc while others warned that the condition would create a shortage of dollars in the open market.

Mr Paracha said the currency dealers assured the SBP that they would bring down the rate by Rs2 per dollar. “It is possible to bring down the dollar rate by Rs2 in 10 to 15 days,” he said.

The SBP chief spokesman confirmed that central bank officials held a meeting with currency dealers and discussed the 35pc limit on the import of dollars. “So far, no circular has been issued to eliminate the condition of 35pc,” he said.

However, prominent currency dealers, including Forex Association of Pakistan (FAP) President Malik Bostan, said the SBP has allowed them to import 100pc dollars from Dubai.

The ECAP as well as the FAP issued press releases announcing that the SBP assured them that the 35pc condition on the import of dollars would be eliminated.

“The decision has been taken to withdraw this condition. We have been allowed to import 100pc dollars against the export of foreign currencies,” Mr Bostan said.

However, he said the shortage was not the only reason behind a rising dollar rate in the open market. The US threat to Pakistan is one of the major factors that forced people to invest in dollars, he said.

“The US threat to Pakistan, political uncertainty and frequent calls for sit-ins against the government have created a panic-like situation, resulting in heavy investments in dollars by ordinary people,” Mr Bostan said.

The United States recently announced that it was halting all military aid to Pakistan.

Published in Dawn, January 10th, 2018