KARACHI: Amid the daily dollar rate appreciation, banks have doubled their buying of the US currency and are sending it abroad via credit cards while the government grapples to control greenback outflows.

The State Bank of Pakistan (SBP) on Friday reported the closing price of the dollar at Rs236.84, an increase of 96 paise compared to the previous day’s rate of Rs235.88.

The dollar has a strong grip over the exchange rate and the clutch is getting stronger each day amid falling foreign exchange reserves and higher imports.

The open market reported the dollar price at Rs241 on Friday, which was almost the same as on Thursday. Currency dealers said finding dollars and other currencies is difficult since demand is very high.

Speaking to Dawn, currency market experts said the SBP and the government have tight control over dollar buying from the open market, but the banks are providing a way out through credit cards.

“The average banks’ buying per week was around two to four million dollars, which has now gone up to $12m on an average,” said Malik Bostan, the chairman of the Exchange Companies Association of Pakistan (ECAP).

It is extremely difficult to buy more than $500 for a common man from the open market but the official way out has been found. Travellers could take up to $10,000 per person from the country, and now credit cards are in high demand.

The currency dealers said the banks’ dollar buying has sucked away greenbacks from the open market.

“We have asked the government to half the limit for travellers to $5,000,” said Mr Bostan. He also suggested that there should be a spending limit of $2,000 per month on credit cards.

Currency dealers said the government is trying to boost country’s foreign exchange reserves by restricting spending and borrowing from global lenders, but the outflows from banks’ via credit cards could undermine the efforts.

Though the SBP insists there is no curbs, the importers said that opening LCs (letters of credit) for raw materials is not easy. “This is being done as the SBP wants to minimise the import bill,” an importer said.

Banks are also buying dollars from the grey market at much higher rates, claims a currency dealer.

However, the outflow through credit cards has added to the vulnerability of the exchange rate, which further strengthens the US dollar in Pakistan.

Published in Dawn, September 17th, 2022