KARACHI: After introduction of mandatory biometric certification, the daily dollar buying from the open market has plunged to $2-$3 million compared to $7-$8m previously.

The State Bank of Pakistan (SBP) had made it mandatory for purchasing foreign currencies equivalent to $500 or more and set the Oct 22 deadline but the exchange companies could not implement the requirement due to technical reasons.

However, for facilitating genuine buyers the SBP temporarily allowed till Nov 5 the exchange companies to sell over $500 to individuals on production of biometric certification from the National Database and Registration Authority’s e-Sahulat franchises.

The e-Sahulat outlets provide certificate of biometric which is rechecked from Nadra’s website by the exchange companies before selling dollars to an individual.

The biometric condition has sharply cut the volume of trading — neither are the buyers available nor are the sellers selling their currencies, said Malik Bostan, chairman of the Exchange Companies Association of Pakistan.

The other foreign currencies sold in the open market were taken to Dubai to bring the equal amount of dollars in Pakistan, he added.

The smuggling of dollars to Afghanistan had compelled the government to issue directives to the Federal Investigation Agency (FIA) to check the practice. However, the involvement of FIA created fear in the market as the agency started inquiring both the buyers and sellers.

Currency dealers said the involvement of the FIA surely reduced the smuggling to Afghanistan but there is fear the currency trading could be shift towards illegal markets.

During the end of the current week, the dollar fell by Rs3.60 in the last three days in the interbank market but the currency experts said the depreciation was news-driven as the government announced quick help from Saudi Arabia. The Saudi Fund announced during the week the move to place $3bn in the State Bank’s account in addition to $1.2bn deferred oil payment facility.

“We hope for the best but it is not sustainable since the inflow of dollars from Saudi Arabia has no match with the increasing outflow from the country,” said Atif Ahmed, a currency dealer in the interbank market.

The import bill for September remained around $6.5bn like August, indicating the trade deficit will continue to surge, hence a higher current account deficit which will keep the rupee-dollar parity under pressure.

The continued appreciation of the dollar since May has inflated the economy with costly imported products and raw materials. “It looks ‘feeling inflation’ is much higher than indicated by the CPI index as it shows 9pc in September but the commodity prices in the markets have caught fire,” said Mr Atif who believes that the entire economy is plagued by the heated inflationary pressure. The price escalation of goods and services would increase poverty in the country, he added.

Published in Dawn, October 31st, 2021