KARACHI: While the dollar rate continued to fall in both currency markets, the decline in the interbank market was attributed to the realisation of export proceeds on a larger scale by exporters.

The State Bank of Pakistan reported the closing price of the dollar at Rs302.95 in the interbank market on Friday, compared to Rs304.94 the previous day, reflecting a decline of Rs2. The dollar has been declining throughout the current week in both markets, but the decrease in the open market was notably higher.

Bankers noted that exporters played a role in the decline of the dollar’s price as they were selling their holdings, likely due to concerns about further depreciation. Bankers denied any influence from the SBP or the government for the devaluation of the dollar, instead attributing it to increased liquidity resulting from the realisation of export proceeds.

However, he expressed concerns about the lack of effective action against illegal activities across the country. “Although it is surprising that the dollar rates in both markets fell significantly within three days, this outcome can be attributed to the crackdown against illegal currency dealers and smugglers,” said Zafar Paracha, General Secretary Exchange Companies Association of Pakistan (ECAP).

He said that the ongoing efforts to combat the smuggling of dollars and other commodities should be sustained to maintain control. He expressed concerns that the authorities responsible for curbing these illegal activities across the country have not been taking adequate action. He added that such measures should have been taken earlier to control the damage.

In the open market, the dollar fell by abour Rs28 during the current week, with its value at Rs304 compared to Rs307 the previous day, showing a depreciation of Rs3 per dollar.

The price difference between the open and interbank markets narrowed to just Rs1.05 or 0.35pc, which is well below the IMF’s condition of maintaining the maximum difference at 1.25pc.

Caretaker Finance Minister Shamshad Akhtar has repeatedly announced the government’s commitment to meeting all conditions set for the next IMF review. An IMF review team is expected in November, and Pakistan expects to receive the second tranche of the $3bn Standby Arrangement.

“The market sentiments have changed after assurances from the high-ups in the government about $70bn investments in the country,” said Mr Paracha.

Published in Dawn, September 9th, 2023