Open market: Dollar surges to Rs118.7 amid supply shortage

Development comes as SBP introduces requirement to submit photocopy of identification

KARACHI: The supply of dollars in the open market has reduced to half after the government introduced a regulation that requires the person to show identification before buying or selling foreign currency in the excess of $500.

The State Bank of Pakistan (SBP) this week, via a circular, said that all buy and sell transactions in foreign currency equivalent to $500 or above will require exchange companies to obtain and retain copies of identification documents - CNIC, NICOP or passport in the case of a foreigner. The move came as Pakistan looks to strengthen the ‘anti-money laundering and combating financing of terrorism’ regime ahead of the Financial Action Task Force (FATF) meet-up in June.

Resultantly, the open-market dollar rate also increased to Rs118.70 in intra-day trading on Thursday as dealers came to terms with a shortage of supply.

“Currency dealers (nationwide) cumulatively buy around $2-3 million each day from individuals in the open markets. This supply to dealers dropped to less than $1 million today (Thursday),” Forex Association of Pakistan President Malik Bostan told The Express Tribune.

“Buyers and sellers prefer to purchase and sell foreign currencies from unauthorised and unregistered currency dealers…this is the cause of low supply of dollars to legal currency dealers,” he added.

“Low availability of dollars caused a surge in the US dollar price to an intra-day high of Rs118.70 (on Thursday) from Rs117.70 (on Monday),” he replied.

Earlier, currency dealers were bound to retain a photocopy of identity documents from buyers and sellers when foreign currency equivalent to $2,500 or over changed hands.

“Currency dealers in other counties retain identity documents’ copy for a minimum $10,000,” he said, adding the condition has hit the currency exchange business.

He urged concerned authorities to hold awareness sessions to educate the nation about this new condition as a majority of the currency buyers and sellers avoid providing a photocopy of their identity documents.

The move comes after the government, through the Finance Bill 2018, also barred non-filers from depositing foreign currency as cash in their bank accounts. However, they can continue to receive remittances and deposit amounts through various instruments. 

Published in The Express Tribune, May 25^th, 2018.

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