KARACHI: Almost all foreign currencies have disappeared from the open market, with citizens struggling to get hold of the dollar even at Rs230.

In the interbank market, the rupee continued to fall for the fourth session in a row, losing 0.47 per cent to close at 219.41 on Thursday.

The open market quoted the dollar at about Rs10 higher than the interbank market, currency dealers said, as all foreign currencies were in short supply, including the dollar, Saudi riyal and UAE dirham.

Bankers also questioned the official price of Rs219.41, claiming that the dollar was changing hands at much higher rates among banks.

SBP reserves drop $87m to $7.8bn

They pointed out that when the dollar reached a peak of Rs239.5 in the interbank market last month, banks were charging in the range of Rs245 to Rs248. Bankers also said they were facing pressure to artificially maintain the dollar rate on the lower side.

In the open market, the trade has shrunk by nearly ten times, according to forex firms.

“We were selling $25 to $30 million a day in the banks just a couple of weeks ago, but it has now fallen to $3 to $4 million,” said Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan (ECAP).

He said most citizens were not currently selling their foreign exchange holdings in the open market, as “a strong grey market” had emerged, which was buying the dollar at a much higher rate of Rs235 while “we are buying at 227.50”.

Besides, smuggling into Afghanistan is another factor that has yet to be controlled. In Kabul, the dollar is selling for an equivalent of about Rs240, attracting smugglers to make a quick buck.

Many currency dealers partially held the government responsible for the recent hike in the dollar as it allowed the import of luxury, or non-essential, items.

They said the government’s permission to allow luxury imports helped stoke up dollar demand in the interbank market, which ultimately affected the open market as well.

After the government’s decision to allow luxury imports, the dollar has appreciated by at least Rs10. It is believed that the government received negative signals from stakeholders of the economy pointing towards slowing growth.

Despite this, the SBP acting governor recently said that Pakistan had arranged more dollars than it required during the current fiscal year.

“While importers are in search of dollars, exporters have held back their proceeds and waiting for further appreciation to get maximum returns,” said Atif Ahmed, a currency dealer in the interbank market.

Another currency dealer said the SBP recently allowed exchange companies to export dollars, which has also resulted in a shortage of dollars in the open market.

SBP reserves down $87m

The SBP’s foreign exchange reserves dropped $87 million to $7.809 billion during the week ended on Aug 19, central bank data showed on Thursday.

Reserves of commercial banks now stand at $5.711bn, making the country’s total reserves at $13.521bn.

Published in Dawn, August 26th, 2022

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