KARACHI: The crackdown against illegal currency dealers has proven highly fruitful, as the dollar rate in the open market fell below the price at the interbank market on Monday.

Currency dealers have reported that the open market is now flush with dollars and will sell more than $100 million to the banks this week, while they sold $20m in the last two days of the previous week.

The State Bank of Pakistan reported the closing price of the dollar as Rs301.16, down Rs1.79, from Rs302.95 on Friday.

However, a more interesting situation unfolded in the open market, where the dollar fell by Rs32 in just six days, reaching Rs300. This drop in the dollar’s value in the open market was due to higher supplies and lower demand. The buying rate for the dollar was Rs297, representing a Rs3 drop in the open market.

Dollar closes at Rs301.16 in interbank against Rs300 in kerb

Zafar Paracha, General Secretary of the Exchange Companies Association of Pakistan, commenting on the situation, said, “It was not the first time that the dollar fell below the interbank market rate, but this time it was the outcome of the crackdown on illegal currency trading, which eroded the grey market from Pakistan.”

He said the continued crackdown against illegal currency traders proved vital for the market and created surplus dollars. He said exchange companies deposited $20m in the last two days of the previous week, and now they expect to sell $100m to $150m this week.

Some currency dealers suggested that this situation could have happened earlier and could have saved the country from an extremely dry market. Before the crackdown against the grey market, the dollar in the open market had skyrocketed, reaching as high as Rs332, and it was even higher by Rs10 to Rs15 per dollar in the grey market. The surplus of dollars, which is being sold to banks, was, in fact, going to the grey market. The grey market had cost the country $8.2 billion in FY23, as remittances dropped by Rs4.2bn, and export proceeds fell by $4b.

The huge losses were borne by the country, but no efforts were made to stop massive smuggling and illegal trading of foreign currencies. Dollars were smuggled to Afghanistan, and huge payments in dollars were made against petroleum products being smuggled from Iran.

The caretaker government has arrested a large number of currency smugglers, and a list has been prepared to identify the people involved in the smuggling of oil from Iran. Outflows of dollars to both borders have been stopped, and the largest border with Afghanistan has been closed for the last four days.

Published in Dawn, September 12th, 2023