No panic in FX market despite escalating tense situation: ECAP

KARACHI: Foreign exchange companies said on Thursday that Pakistan’s currency market remains stable despite ongoing tensions with India, supplying $25 million dollar daily to the interbank market and can provide up to $1 billion monthly to the government in case of an emergency.

Malik Muhammad Bostan, chairperson of the Exchange Companies Association of Pakistan (ECAP), said in the statement that despite India’s recent aggression within Pakistani territory, the Pakistani currency market remains stable, and the rupee has not depreciated.

“We are capable of providing the government with $1 billion dollars per month in case of war or emergency,” Bostan said. Bostan’s comments come after Pakistan’s military reported shooting down 25 Indian drones that entered its airspace. Hostilities between the two nuclear-armed neighbours have escalated following Indian air raids on multiple locations within Pakistan.

He mentioned that there are currently no buyers for dollars in the open market. However, exchange firms managed to sell $10 million in the interbank market. “There is no panic in the currency market,” he said.

Bostan indicated that once flight operations return to normal, the inflow of dollars is expected to increase.Over the past two years, the State Bank of Pakistan has purchased $9 billion to maintain a stable exchange rate, while exchange companies contributed $6 billion to the interbank market last year.

He also suggested that if the government wishes, monthly remittances could rise from $4 billion to $8 billion. According to Bostan, the real value of the dollar is 250 rupees, but it is not being adjusted downward due to pressure from the International Monetary Fund (IMF) and exporters. He mentioned that the government plans to soon connect exchange companies to the Pakistan Remittance Initiative (PRI) system.