ISLAMABAD: Alleged manipulation by certain banks has resulted in the weakening of rupee against the dollar in the last couple of days, which reversed on Thursday after strict actions taken by law enforcement and intelligence agencies against speculators and hoarders.
The sliding rupee against the dollar got reversed and strengthened in inter-bank and open markets simultaneously with clear-cut margins without any apparent change in the fundamentals of market forces. This clearly indicated that it was due to connivance of certain commercial banks which became instrumental in manipulating the currency market in order to maximise their benefits and profiteering.
In the past, the profits of the banking sector ballooned without facing any actions or being burdened with windfall gains tax after they managed to foil all such attempts in the recent past.
Top intelligence sources told this scribe in background discussions that the commercial banks, along with other stakeholders, are acting as a cartel, jacking up the inter-bank USD rate to get profit on the lined-up Letter of Credits (LCs) of importers and deliberately delaying LCs to feign shortage of dollars in the market and raising interbank dollar rate to Rs282.
After hue and cry by importers and other stakeholders, they diverted the blame on the upcoming payment of installment to IMF by the Government of Pakistan in November. However, market sources revealed that there is no shortage of USD in the market as money changers are getting good inflows.
Therefore, the banks accumulated USD at 276/277 and then raised the interbank rate to 280+ to earn profits. The market stakeholders claim that banks usually resort to these sorts of tactics to offset the losses incurred due to continued depreciation in the price of USD.
This scribe contacted Malik Bostan, Chairman of Exchange Companies, on Thursday and inquired about the weakness and then strengthening of the rupee against the dollar. He said it was manipulated under which efforts were made to convert all benefits into losses by creating a new wave of weakness of rupee against dollar and it was conveyed to high-ups. So the rupee got strengthened on Thursday and he hoped that this trend would continue in the coming days as well.
Zafar Piracha, Secretary General Exchange Companies Association, when contacted, said that there was alleged manipulation of certain banks after which the rupee started declining against the dollar but then proper actions were taken by the relevant authorities after which the rupee-dollar parity improved in both interbank and open markets.
Independent economists argue the government took administrative steps in the right direction, which yielded positive results. But its sustainability would depend upon the economic managers’ ability to generate dollar inflows in order to come out from the dollar liquidity crunch position.
Pakistan, they said, would have to repay around $790 million as debt servicing of foreign loans, including principal and mark-up repayments. Out of this, the government had repaid the Euro bond interest repayment in recent weeks.
Now the government is also bound to repay $187 million as principal and markup amount in the current month, so the dollar inflows need to be improved in order to stabilise the currency market on a sustained basis.