ISLAMABAD, Nov 01 (INP-WealthPK): The Businessmen Panel of the Federation of Pakistan Chambers of Commerce and Industry has shown concerns over the poor mechanisms to ensure the availability of dollars in the country and asked the State Bank of Pakistan to become more vigilant as the open market is immensely short of the greenback at a time when the rupee is largely stable in the inter-bank market, WealthPK reports.
FPCCI former president and BMP Chairman Mian Anjum Nisar said that the currency market is facing a severe shortage of the US dollar despite the fact that the rupee remains largely stable in the inter-bank. He said that the declining trend of the dollar proves to be meaningless as the majority of exchange companies and dealers have no dollars and the shortage has persisted for almost a week.
The BMP chairman stressed the need for taking bold steps as the rupee, after remaining stable for almost two weeks, once again started to witness a volatile trend, posting a decline for the seventh consecutive session last week.
Mian Anjum said that presently very limited transactions are being held against the daily regular transactions of up to $60 million in the open market. He feared that the dollars are being smuggled to Afghanistan. Despite the central bank’s measures, smuggling remains rampant as it seems that government institutions are not on the same page. He asked the government to revisit its trade and immigration policies with Afghanistan and Iran.
He observed that the weakness in the local currency is driven by dwindling reserves and uncertainty regarding inflow commitments despite the fact that Finance Minister Ishaq Dar has constantly been saying that the rupee is undervalued and it could soon recover to Rs200 per dollar mark, which is its real value.
Mian Anjum said that in another key development, the current account deficit (CAD) declined for the third straight month in September. It fell to $0.3 billion, less than half the level in August. The decline in CAD is a good sign for the South Asian economy already facing dwindling foreign exchange reserves.
He said that by having a clear policy to curb the volatility in the exchange market, the central bank should be fully geared to act and monitor the movements more vigilantly and should be ahead of the curve as they have more information than an average market player.
He said that the government needs to relax rules for exchange companies as stringent procedural requirements are making customers reluctant to approach the open market.
Amid declining foreign exchange reserves, Pakistan has faced an exchange rate crisis multiple times this year with authorities vowing a crackdown on speculators. The promised action comes in tandem with wild swings seen by the rupee that hit record lows in the inter-bank market and witnessed its worst monthly performance in July in over 50 years.
The arrival of Ishaq Dar at the helm of the finance ministry did trigger a bullish trend in the currency market, with the rupee appreciating nearly 10% in less than three weeks, but it also led authorities to suspect manipulation by banks and exchange companies.
In response, the State Bank of Pakistan (SBP) said that at the start of October it would complete an investigation into alleged manipulation by commercial banks of foreign exchange operations in the country.
Mian Anjum observed that besides increasing exports and controlling imports, the government would have to take administrative measures as there is a great demand for dollars in the market. He said that there is a complete breakdown of economic policymaking, as the country’s fiscal policy has become subservient to monetary and exchange rate policies, according to a statement received by WealthPK.
