SBP, FIA to take action against illegal foreign exchange firms

KARACHI: The State Bank of Pakistan and Federal Investigation Agency (FIA) will take joint action against illegal foreign exchange operators and speculators across the country in a bid to ease pressure on the rupee, a statement said on Tuesday.

A high-level meeting was held between the SBP governor and FIA director general on November 8. The meeting took stock of illicit foreign exchange activities and chalked out a comprehensive plan of action against illegal foreign exchange businesses in the country.

It was agreed during the meeting that a concerted joint effort was required to apprehend and implicate illegal foreign exchange operators and speculators across the country. “Accordingly, the SBP and FIA have jointly initiated action against illegal foreign exchange operators in Pakistan. To this effect, joint teams from the SBP and FIA shall identify and take penal/legal action against the perpetrators so as to curb speculation and the grey market,” the SBP said in a statement.

“The teams, while remaining within the legal mandate allowed to them by the relevant laws, would crack down on all illegal foreign exchange operators and businesses across Pakistan,” it added. Banks and exchange companies have been authorised by the SBP to carry out foreign exchange business in Pakistan. Involvement of any person or entity, other than banks and exchange companies, in foreign exchange business is illegal under the Foreign Exchange Regulation Act, 1947.

The illegal foreign exchange business also adversely affects the open market exchange rate and increases the gap between the interbank and open market exchange rates. The gap between the interbank and kerb markets’ rates has widened to 6.1 rupees. The rupee closed at 221.65 per dollar in the inter-bank market. It was trading at 227.75 in the kerb market, according to the rates provided by the Exchange Companies Association of Pakistan.

Peshawar, a city bordering Afghanistan that is a source of currency smuggling, is where the rupee is trading at 235 to 238 against the dollar.

The government and the central bank have also decided that the maximum limit per person, per day, to buy foreign currency, in the form of cash or outward remittances from all exchange companies, would be reduced from $10,000 (or its equivalent in other foreign currencies) to $5,000, according to reports. Also, the maximum limit per person per calendar year to buy foreign currency, in the form of cash or outward remittances, would also be reduced from $100,000 (or its equivalent in other foreign currencies) to $50,000.

These decisions might help in lowering the speculation-driven high dollar rate in the open market. Moreover, this should reduce the strain on the country’s foreign exchange reserves, currently standing at $8.9 billion.