KARACHI, May 6: Import of around $25 million worth of gold and silver in the past three days created extra demand for dollars in open currency market increasing the gap between official and open market exchange rates.
Unlike importers of other items those importing gold or silver have to arrange foreign exchange from their own resources i.e. from the open market and not from banks. Naturally then increased import of these precious metals particularly that of gold pushes up demand for dollars in the open market.
A source close to Karachi Customs told Dawn that $15 million worth gold and silver was imported on Tuesday alone adding that $10 million worth of gold was imported on Wednesday and Thursday.
No senior Customs official was available to confirm this but gold merchants said they had also learnt from their sources about import of the same amount of gold and silver in the last three days. But they too declined to be named.
Gold merchants say the import of $25 million worth of gold and silver in just three days was much higher than the average import.
Sources in foreign exchange companies say that gold importers rally made the US dollar dearer in the open market and also widened the gap between official and open market exchange rates.
The gap between official and open market exchange rates of the US unit telegraphic transfers or TT increased to 90 paisa a dollar on Tuesday. The spread between the spot rates in the two markets also expanded to 70 paisa with the US unit selling around Rs57.45 in the inter-bank market and at Rs58.15 in the open market.
Though this huge gap has somewhat narrowed as gold importers- led demand for dollar has eased off the fact that the open market exchange rates are vulnerable to gold import shocks has raised a key question.
Should gold importers be allowed to buy foreign exchange from banks to avoid volatility in open market exchange rates? Gold importers think they should.
Says the chairman of All Pakistan Gem Merchants & Jewellers Association Akhtar Khan: "We have asked the government to allow us to buy foreign exchange from banks but are waiting for their response."
While talking to Dawn over telephone he also admitted that higher gold imports this week was one of the key reasons for pushing up dollar demand in the open currency market.
Gold imports normally rise ahead of and during the month of Rabiul Awwal (the third month of Islamic calender) which is considered the beginning of "marriages season" in most parts of Pakistan.
Senior central bankers also support this demand on the ground that once gold importers start purchasing dollars from banks it will be easier for the SBP to ensure stability in exchange rates.
This issue is bound to crop up at a meeting between State Bank Governor Dr Ishrat Husain and heads of foreign exchange companies. President of Exchange Companies Association of Pakistan Haji Haroon told Dawn that the SBP chief has summoned heads of all exchange companies at his office here on Friday. "But the agenda of the meeting is not known."