Exchange Companies Allowed To Sell 20% Remittances In Open Market

According to the Exchange Companies Association of Pakistan (ECAP), Pakistan’s central bank has permitted currency dealers to sell up to 20% of workers’ remittances sent home by abroad Pakistanis in order to alleviate the severe US dollar shortage in the open market. 

Prior to this, the State Bank of Pakistan (SBP) had mandated that currency dealers hand over all worker remittances in the interbank market, leaving essentially little for the dealers to offer to individual clients.

Speaking at a meeting chaired by SBP Governor Jameel Ahmed, ECAP President Malik Bostan revealed “Afghanistan’s government has issued a circular urging its citizens and traders to convert Pakistani currency available with them into US dollar and other foreign currencies”. 

Afghan people are holding billions of rupees. “Their conversion into the US dollar has caused rupee’s devaluation, as the Afghans are converting the currency through Pakistani markets in border areas (across Durand Line),” he said, according to an ECAP statement. 

In border districts vs Karachi, the US dollar is worth 10–15 rupees more in Pakistani rupees. Operators of the Hawala-Hundi (reference) system and smugglers are experimenting with Pakistani money. “Afghanistan is draining Pakistan’s reserves of almost $2 billion a month,” he continued. 

For the second straight working day, the Pakistani rupee continued to decline as it dropped 0.23% (or Rs. 0.52) to settle at Rs. 221.95 versus the US dollar in the inter-bank market. 

The chairman said the exchange firms are buying and selling dollars as per the rate set by ECAP.  

“Due to the low rate of exchange companies, customers are selling in the black market instead of selling to exchange companies as their rate is 10 to 15 rupees more per dollar than exchange companies,” he said. 

“Due to this illegal buying and selling, after September 2022, the business of foreign currency buying and selling of exchange companies has decreased by about 80%. Currently, 1% of customers are selling dollars at the counter of exchange companies, while buyers are 200% more than before,” he said.