THE State Bank’s new restrictions on individual dollar purchases appear to be an attempt to manage a market getting jittery about potential foreign exchange rate depreciation. With the trade deficit widening in recent months owing to an uptick in economic growth, people are expecting the exchange rate to slide in the near term. Those with spare cash are trying to get ahead of it by purchasing dollars and other major currencies to hedge potential losses, bringing the exchange rate under pressure. The new regulations are clear: dollars or other major currencies for foreign currency accounts can only be purchased via a bank transfer or cheque. Other requirements for bank account holders stay the same. The real bite will, however, come from the cut in the limit for CNIC-based cash purchases from $900 to $500 per month. That is the change that many fear could give a big boost to the grey market.

The new regulations are also expected to alter the competitive landscape of Pakistan’s foreign currency exchange market. Foreign currency bought from an independent exchange company will be issued in the form of a cheque for deposit as money changers are not permitted to hold dollars in bank accounts, and thus, cannot make account-to-account transfers. Clearance of cheques takes five days in the case of dollars and up to 20 for euros and pounds. Bank-owned exchanges face no such handicap. A foreign currency account at a bank that also owns an exchange company means an instant transfer. Independent money changers complain that these rules favour bank-owned forex outlets. That said, the changed rules will make it harder for ordinary people, with or without a foreign currency account, to access dollars when they actually need them. While account holders face long delays between payment and receiving their purchases, those relying on cash purchases will now have their allowance slashed, making it harder for families to send remittances to cover emergency expenses abroad. While it is important to clamp down on cash and illicit outflows, it is equally crucial to ensure ease for legitimate needs. The ostensible purpose of the new regulations is to promote a cashless economy, and stem outflows in illegal crypto currency investments. Only time will tell if the State Bank will succeed in this endeavour.

Published in Dawn, November 18th, 2025