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Thursday March 28, 2024

FIA directed to crack down on dollar-hoarders

Asked about the crackdown, the central bank’s spokesman Abid Qamar said no official instructions have been received as yet, but he said the State Bank of Pakistan (SBP) has an arrangement to curb violation of foreign exchange laws.

By Erum Zaidi
April 06, 2019

KARACHI: Government on Friday directed the Federal Investigation Agency (FIA) to crack down on ‘dollars hoarders’ in a bid to stop freefall of rupee that has lost over a quarter of its value in a year and triggered five years high inflation.

“Government has directed FIA to launch a full-fledged operation against dollar hoarding, and speculative currency trade,” Minister for Information and Broadcasting Fawad Hussain said on Twitter. “The operation is being launched in coordination with the State Bank and Ministry of Finance.”

Asked about the crackdown, the central bank’s spokesman Abid Qamar said no official instructions have been received as yet, but he said the State Bank of Pakistan (SBP) has an arrangement to curb violation of foreign exchange laws.

“We’ve already an arrangement with FIA on curbing illegal foreign exchange market activities under the SBP’s Foreign Exchange Regulation Act,” Qamar said. “The central bank takes action, in collaboration with the FIA, against the exchange companies, which violate the Act.”

The government has already unveiled plan to empower the SBP to regulate foreign exchange regime in the country more effectively and prevent illegal foreign exchange transactions. The ministry of finance proposed to amend the Foreign Exchange Regulations Act 1947 by introducing a bill in the National Assembly. “The amendments would substantially strengthen the SBP’s powers to issue necessary regulations/instructions relating to inland movement of foreign currency and enable it to monitor such movement,” the finance ministry said in a statement on Thursday.

Currency dealers said they are formulating a mechanism to discourage dollar buying from hoarders and speculators and sell the foreign currency to the original buyers only. “This mechanism is expected to be implemented next week,” Forex Association of Pakistan’s President Malik Bostan told The News after a meeting with the central bank’s officials on Friday.

“Money changers will begin vetting dollar sales and increase scrutiny of each and every transaction,” Bostan said. “Dollars will not be provided to meet the investment objectives.” The currency dealer said dollar and the other foreign currencies would be available for expenditures on foreign study, medical treatments abroad and for people going to Hajj, Umrah and Ziarat. Bostan said exchange companies are short of dollar supplies, while the demand continues to go up. “Forex firms have just $4-5 million in hard currency cash, but the demand hovers at $7-8 million.”

SBP Executive Director Irfan Ali Shah convened a second consecutive meeting with the foreign exchange dealers to discuss how to bring the dollar rate down and ensure the availability of the greenback in the open market.

The rupee was trading at 142.50 for buying and 143 for selling against the dollar in the open market. The rupee closed almost flat at 141.30 / dollar in the interbank market compared with 141.39 in the previous session. Shah told the delegation that the rupee would not depreciate any further, as the government has made big foreign payments last week.