Security authorities’ continued crackdown on illegal foreign exchange trade in grey and black market has resulted in a $900 million excess in the open market, which has been deposited in banks, currency traders claimed this week.
Results of Crackdown Against Black Market
So far in September, Pakistan’s rupee has recovered more than 6.1 percent against the dollar, making up for all of the rupee’s losses in August and theoretically becoming the best-performing currency in the world last month.
The rupee fell to a record low of 307.1 versus the dollar in the interbank on September 5, but has since recovered sharply since the country’s financial regulator and security services began taking action the next day to combat black market operations.
According to dealers, the crackdown on black market operators against the informal market has resulted in tens of millions of dollars flowing back into Pakistan’s interbank and open markets.
“We have deposited an estimated $800 to $900 million in the banks since the crackdown started in September showing highly appreciable results,” Zafar Paracha, General Secretary of the Exchange Companies Association of Pakistan (ECAP), told media on Monday.
Increase in Daily Trading
As a result of the crackdown, the daily average trading volume of exchange businesses increased to $50 million, up from $5-$7 million previously.
“We are selling up to $40 million per day to the banks while inflows from overseas Pakistanis are also unprecedented … Remittances being channelled through the exchange companies have increased by 10 to 15 percent and surely inflows through banks would also rise,” Paracha added.
State Bank Foreign Reserves
Until September 28th, the central bank possessed $ 7.6 billion in reserves.
The State Bank of Pakistan (SBP) stated on Monday that the dollar continued under pressure, losing another Rs. 1.04 to settle at Rs. 281.65, down from Rs. 282.69 the previous day.
A market-determined currency rate is a major need for Pakistan to receive a $ 3 billion rescue loan from the International Monetary Fund (IMF), which was agreed to in July to help prevent a sovereign default.
While there have been previous attempts to suppress the illegal market when the rupee has been under pressure, the latest drive began when licensed merchants asked army chief General Asim Munir to intervene rather than leaving it to the civilian caretaker administration.
To read our blog on “Caretaker FM declares war against illegal money exchanges,” click here.
