Exchange Companies Depositing $10 Million In Banks Daily After Dollar Rate Was Uncapped

The government’s recently announced policy about uncapping the US dollar has started giving fruit. In the last three days, the dollar rate decreased?to Rs.7. The exchange companies have also started depositing up to $10 million daily in banks.

Exporters who were reluctant to sell their holdings now have realized that the dollar’s speculative level is coming down. The higher inflow of dollars in banks and open markets eliminated the speculative prices. 

However, Atif Ahmad, a currency dealer working in the interbank market, says, “Exporters fear that a further decline in dollar prices could cost them billions. It resulted in panic selling of export proceeds.”

The exact amount of dollars the exporters keep abroad is not known. Under the law, they have to surrender dollar proceeds within six months. The capping of the dollar created issues, such as the widening gap between the interbank and open market dollar rates, resulting in an atmosphere of black marketing in the country. 

The black markets offered a higher dollar rate than the rates offered by the banks. This illegal market paved the way for the dollar drain, the big beneficiary of which was Afghanistan.  

According to a report, about 2 billion dollars were exported to this neighboring country per month. Zafar Paracha, the General Secretary of the Exchange Companies?Association of Pakistan (ECAP), said, “For the last week, we have been depositing on average $10 million to banks daily. Demand in the open market vanished as 90 percent of the open market consists of sellers as only 10 percent of clients buy dollars.”

He said that the maximum buyers in open market were those doing illegal trading who were buying from us and selling to the grey market. 

Remittances are also increasing in banks and exchange companies due to uncapping of the exchange rate. The general secretary of the Exchange Companies Association of Pakistan said, “The uncapping was a vital decision. It was the only solution to eliminate the speculative forces causing an artificial hike in dollar prices and massive smuggling. ?