KARACHI: The rupee on Thursday gained ground in the open market against the dollar after the State Bank of Pakistan (SBP) allowed commercial banks to buy the greenback at the interbank market to settle international card payments.
The dollar on Thursday closed at 299 in the open market, while it ended at 311 on May 31, 2023, per the Exchanges Companies Association of Pakistan (ECAP), which also said that dollars were in short supply as people were not selling the greenback after the staggering fluctuation.
"This is for the first time in Pakistan that the dollar rate has fallen by Rs27," Malik Bostan, Chairman Exchange Companies Association of Pakistan (ECAP), said in a statement soon after the rupee's epic ascent in intraday trade.
and congratulated Finance Minister Ishaq Dar and the SBP governor.
He said the banks were earlier buying dollars at 315 and selling them at around 325. "The dollar depreciated by Rs25-27 in view of the rates offered by banks, while from ECAP's standpoint it is a Rs15 fall," he said.
Bostan was all praise for Dar for taking prompt action on his advice that helped the rupee gain sharply versus the dollar.
The chief of the moneychangers' trade body said that commercial banks were purchasing dollars from the open market at a high rate for credit card settlements.
Bostan claimed Dar had contacted him when the dollar reached Rs315 asking the reasons behind the widening gap in interbank and open market rates.
“After hearing this, the finance minister took the decsion promptly and issued the circular yesterday,” said Bostan and added, "It will be a testing period till July 31, and it is hoped that the rupee will strengthen further."
He further said that pilgrims would benefit from the move as they were buying dollars at a rate of Rs315 and now they could procure the greenback at a much lower rate of Rs285.
ECAP, in a prior statement, had reported the dollar was changing hands at Rs300 in the open market during the intraday trade.
The SBP decision also followed the International Monetary Fund’s demand that Pakistan fixes its currency market prior to resuming a $6.5 billion bailout programme.
“In view of the representations received from stakeholders, it has been decided to allow Authorised Dealers to purchase USD from Interbank for settlement of card-based cross border transactions with IPS [international payment schemes]," the central bank has said in its circular.
The analysts were expecting a decline in rupee value following the implementation of new guidelines.
The SBP made the right decision at the appropriate moment, according to Zafar Paracha, the general secretary of the ECAP, which will cause the open market currency rate to drop by 20 to 25 rupees.
"The reduction in the official and kerb markets’ rates will also serve to increase remittance inflows, he said and added: "Any notable differential in rates between the official and kerb markets promotes transactions outside of the official banking system."
Rupee has fallen by 23.6% since January this year in the interbank market.