ISLAMABAD/KARACHI: A day when the value of the US dollar against the rupee touched an all-time high, Prime Minister Imran Khan set up a committee to control devaluation of the local currency and capital flight from Pakistan.
The committee headed by Adviser to the PM on Finance Dr Hafeez Shaikh was formed on Wednesday during a meeting in which members of the Exchange Companies Association of Pakistan (ECAP) apprised the prime minister about various factors involved in capital flight and devaluation of the rupee against the dollar. The governor of the State Bank of Pakistan (SBP) is a member of the committee.
The committee has been tasked to ascertain whether the provision of carrying $10,000 by anyone who travels abroad from Pakistan can be slashed down to $3,000 as proposed by the ECAP.
Talking to Dawn after the meeting, ECAP president Malik Bostan said he along with a delegation called on the prime minister and gave him proposals on how the government could control devaluation of the rupee.
He said the prime minister attentively heard their proposals and assured them that he would take action in the light of their recommendations.
Dollar rate comes down by Rs2 after currency dealers hold meeting with prime minister
Mr Bostan quoted the prime minister as saying that Pakistan had to face humiliation before the world when the value of its currency fell against the dollar.
Mr Bostan said he told the premier that there was no shortage of foreign exchange in Pakistan, but it required proper management. “We informed the prime minister that during the last 23 years $160 billion was sent abroad from Pakistan while total foreign debts of the country stood at $100bn.”
The ECAP president said most of capital flight cases were being reported from Peshawar and Quetta and held the unchecked Afghan transit trade responsible for the problem.
He said when transit trade with Afghanistan started, there was no commercial bank in the neighbouring country and therefore local exporters were allowed to bring currency from Afghanistan and later they had to deposit the money in the banks in Pakistan. “But even after opening of banks there, local exporters bring money from Afghanistan, but do not deposit it in banks in Pakistan. Instead, they send foreign exchange to Dubai and European countries,” he said.
By taking action in this regard, he said, $2bn could be injected into the local economy.
The delegation also suggested to the prime minister to reduce imports by banning import of those products which were produced in the country as well. “By doing this we can cut our import bill from $5bn to $10 billion annually,” Mr Bostan said.
The delegation said every Pakistani who travelled abroad was allowed to take $10,000 with him and this amount could be reduced to $3,000. “In this way we can save another $2bn every year,” Mr Bostan added.
Meanwhile, President of the Forex Dealers Association Shaikh Allauddin said a number of measures were suggested to reduce the outflow of dollars from the country.
The meeting was also attended the SBP governor, chairman of the Federal Board of Revenue and director general of the Federal Investigation Agency.
Just after the meeting, exchange companies issued new exchange rates and the dollar rate was slashed by Rs2 to sell at Rs144.
During the first session the dollar went up as high as Rs146.50 in the open market while the most of the exchange companies were not selling dollars — only buying. The dollar was short in the market and not available even at Rs146.50.
“Yes, Rs144 is a forced price of dollar,” said ECAP secretary general Zafar Paracha who did not attend the meeting. He said the dollar was not easily available while the exchange companies were not in a position to provide any big amount of dollars.
The inter-bank currency market remained unchanged at Rs141.50 but the bankers said it was controlled by the State Bank. The dollar rate may shoot up if the State Bank allows banks to freely trade the dollar without influencing the market.
The rate in the inter-bank is considered official exchange rate but the open market rate fluctuations and shortage of dollars sometimes compel the State Bank to change the exchange rate.
The SBP usually uses banking rates for devaluation of the rupee.
Published in Dawn, May 16th, 2019