Currency dealers point at hawala handlers for forex turmoil

KARACHI: Currency dealers association on Tuesday expressed its dismay over allegations that the exchange companies were driving up the price of the dollar in the forex market and should therefore be shut down.

Malik Bostan, chairman of the Exchange Companies Association of Pakistan (ECAP), gave a statement that “media reports claiming shutdown of exchange firms were worrying stakeholders”.

Bostan contacted the government and higher authorities and informed them that there were allegations against exchange firms for influencing the dollar’s value compared with the rupee. The government is therefore under pressure to close the exchange firms.

Bostan informed the government that it was black marketers, illicit forex dealers, and hawala/hundi handlers who were responsible for driving up the value of the dollar in the currency market. They should be subject to punishment.

“We will not support any exchange companies engaged in speculative or unlawful activity in the currency market. We support the government in taking action against any exchange company engaged in such activities,” he said.

Bostan’s comment follows the announcements of three major banks, UBL, Meezan Bank, and MCB Bank, regarding the setting up of their wholly-owned exchange companies. Analysts predict that the exchange firms run by the banks would increase market depth and efficiency.

Recently, the SBP has advised both category ‘B’ firms and franchisees to either merge with established full-fledged entities or sell their businesses to stronger counterparts. Failing to comply with this directive within the stipulated three-month window would result in the automatic cancellation of licenses for standalone category ‘B’ firms, it said.

The SBP has also asked the exchange companies to increase their paid-up capital to a minimum of Rs500 million (excluding losses) by December 31, 2023, up from the current minimum requirement of Rs200 million.

Bostan stated that if the ongoing crackdown against currency smugglers, hoarders, and black marketers continues, the rupee will rise to 250 against the dollar in the coming days.

The rupee has been rebounding, rising to 296 against the dollar from its record low of 330 in the open market. From an all-time low of 307 to the dollar in the interbank market, the rupee has increased to 295 now, according to Bostan. Since the crackdown began, thesupply of dollars with the exchange companies has increased significantly. The exchange firms have been selling $15 million to the interbank every day. However, it was only $5 to $7 million previously. Bostan hopes the supplies will increase to $20 million per day in the coming days.

Last month, the ECAP urged the Federal Investigative Agency (FIA) to stop questioning and harassing customers who sell foreign currency to exchange firms, saying it has affected the supply of dollars in the open market.

Bostan said that many customers have complained that they were approached by FIA officials at their homes after they sold foreign currency to exchange companies and were asked about the source of their funds.

Bostan said he had suggested to the FIA director general and higher authorities to create a portal for people who want to sell or deposit their foreign currency holdings with exchange companies or banks so that they can register online and receive a confirmation number.

The caretaker administration and the State Bank of Pakistan implemented a number of measures to reduce excessive and unnecessary dollar demand in the open market. To stop currency smuggling, the measures included increased border security, and cancelation of the licenses of exchange firms engaged in illegal activity.