KARACHI, May 21: The State Bank has warned all foreign exchange companies to desist from promoting speculative dollar buying, which has widened the gap between official and open market exchange rates. SBP Executive Director Farhat Saeed summoned all the leading exchange companies at his office on Saturday and told them to behave or be ready to face music, sources privy to the meeting told Dawn.

The US dollar had touched Rs61.05 for spot selling in the open market on Friday when it was selling around Rs59.55 in the inter-bank market. Thus the gap between the inter-bank and open market rates of dollar had expanded to Rs1.50 per dollar. That was too much from the central bank’s viewpoint.

At the beginning of this month the gap between the two rtes was just 50 paisa a US dollar. Money changers say when the gap between the official and open market prices of dollar widens beyond 50 paisa a dollar it starts attracting overseas Pakistanis to send foreign exchange back home through unofficial channels rather than banks. That means a fall in the volume of such remittances that are the second largest source of foreign exchange earnings after exports. Naturally, the central bank intervenes whenever the gap between the official and open market exchange rates widens beyond this level.

Exchange Companies Association of Pakistan Chairman Munaf Kalia told Dawn that he and his colleagues had assured the SBP officials that they would try to bring down the rate of dollars in the open market from Monday. Even on Saturday, the US dollar lost 25 paisa to close at Rs60.80 for spot selling, according to the ECAP. “You will see the dollar falling further from Monday.”

Mr Kalia said the dollar had risen in the open market mainly because (i) people have started shifting investment from the stock market and real estate market to greenbacks and (ii) the US dollar itself was rising in the international market.

But sources at exchange companies add another thing to the list — smuggling of dollars to Afghanistan in connivance of exchange companies operating in Peshawar.