KARACHI: The dollar has come under renewed pressure amid higher demand from importers.

The dollar rate appreciated Rs1.51 to Rs229.88 on Monday in interbank trading while the open market rate increased Rs2.50 to Rs231.50.

Bankers said the “import mafia” has practically drowned the national economy and is still insisting that more imports be allowed while the country is already on the brink of default.

“Emergency should be declared to fix the balance of trade. A 48-billion-dollar trade deficit in 2021-22 has eroded the country’s ability to make payments,” said a senior banker.

“There is no concern among the economic managers as to how the country will make payments for these imports. Dollar reserves of banks are already at rock bottom. Banks are unable to arrange dollars for imports,” he said.

“If the inflow of dollars comes within a week, the exchange rate will be in a comfortable zone. Otherwise, a more difficult situation is waiting for us,” said Samiullah Tariq, head of research at Pak-Kuwait Development and Investment Company.

He said there is an acute shortage of dollars and yet the government spent $3.6bn for the import of petroleum products for the next two months. The payment is due within 30 days, he said. The huge outflow is causing dollar shortages as the banks are unable to arrange foreign exchange for imports.

“During a meeting last week, I asked Finance Minister Miftah Ismail to stop Afghan imports, which have created a huge trade deficit,” said Malik Bostan, chairman of the Exchange Companies Association of Pakistan (ECAP). He added that Afghanistan has been hostile towards Pakistan as it increased coal prices by $200 per tonne when Pakistan expressed willingness to buy coal.

“Since the Taliban took charge of Afghanistan, we have to pay about $2bn per month for imports from Afghanistan,” said Mr Bostan. He noted that the dollar was at Rs157 in August 2021 and reserves of the State Bank were $20bn.

“The official dollar rate is not the actual rate. A grey market has emerged. One can buy dollars at higher rates from the grey market,” said Anwar Bhai, a currency dealer in Karachi.

To raise dollars, the federal government on July 22 passed an ordinance that allows it to sell national assets without any intervention from regulatory authorities.

The ordinance is yet to be signed by the president. The move shows the desperation of the government over its inability to stop the economy from looming default. Arab countries are demanding stakes in important national assets against dollars. Meanwhile, the International Monetary Fund is demanding that the country should first raise $4bn and then the Washington-based lender will disburse the $1bn tranche.

Published in Dawn, July 26th, 2022