KARACHI: Pressure on exchange rate mounted on Tuesday as the dollar closed between Rs116.60 and Rs116.80 in various cities around the country in the open market.

Banking sources said the State Bank held a meeting with the exchange companies on Monday to discuss the exchange rate but the currency dealers refused to discuss any details of the meeting.

It was not clear why the central bank has kept the meeting secret and asked the currency dealers not to reveal the discussions. When contacted, the State Bank’s chief spokesman Abid Qamar said there was nothing new for the media in the meeting.

However, it is believed that devaluation of the local currency was the focus of discussions as about 9.5 per cent depreciation of the rupee within a span of four months has started dollarisation in the country.

“People are buying dollars as it is the best investment so far,” said Exchange Companies Association of Pakistan Secretary General Zafar Paracha.

Fears of further devaluation are growing among banks and the currency markets particularly in the wake of falling foreign exchange reserves and increasing current account deficit.

Currency dealers, who did not wish to be named, told Dawn that they fear the interim government, which would have no political risks, could go for further devaluation.

The SBP data shows foreign exchange reserves held by the central bank are down 40pc to $11.8 billion as of March 22 (2.6 months of import cover) since hitting a peak of $19.5bn in Oct 2016.

Currency dealers in the banks said demand for the greenback is running on the higher side and the interbank market was tightly kept under control by the State Bank. The US dollar traded at Rs115.60. However, they said the increasing imports kept pressure for more dollars in the market.

The trade deficit in the first 8 months of 2017-18 jumped 21pc to $24.27bn. This was significantly higher than the trade deficit of $20bn in the same period of last year.

The government says it is trying to improve the situation through export incentives and devaluation of the local currency. The country’s overall exports increased by 11.6pc to $14.85bn during the July-February period of this fiscal year.

Published in Dawn, April 4th, 2018