Pakistan ponders action after rupee’s free fall

Govt decides to crackdown against currency dealers selling dollar above Rs144

KARACHI: Prime Minister Imran Khan on Wednesday took notice of the free-fall of the rupee in the open market and ordered authorities to take strict action against currency dealers selling the dollar at a higher price, as the rupee hit a new intra-day low of 147 to the US dollar and closed at a record low at 146.25.

"PM Khan has warned to take strict action against currency dealers if they are found selling dollar above Rs144," said the Exchange Companies Association of Pakistan (ECAP) Secretary General Zafar Paracha, who was part of a meeting chaired by the prime minister at the PM House.

Adviser to Prime Minister on Finance Abdul Hafeez Shaikh, the State Bank of Pakistan (SBP) Governor Dr Reza Baqir, the Federal Board of Revenue (FBR) Chairman Shabbar Zaidi and the Federal Investigation Agency (FIA) and the Intelligence Bureau (IB) director generals attended the moot.

The ECAP President Sheikh Allaudin and Pakistan Forex Association President Malik Bostan were also part of the five currency dealers' delegation that attended the moot.

No official word came out after the meeting. However, according to the ECAP secretary general the PM ordered to take strict disciplinary and monetary actions to stop the free-fall of the rupee against the dollar.

“Law enforcement agencies (LEAS) would have the right to raid the exchange companies if they receive complaints against any exchange firm selling the dollar and other foreign currencies above the rates decided at the meeting. The PM has asked dealers to buy the dollar at Rs143.5 from individuals,” he said.

The dollar was available below Rs142 a week ago. However, it started to fall in the wake of speculations that government had agreed to let the rupee depreciate by 20% or up to Rs165-170 to the greenback as part of the recently singed 39-month long International Monetary Fund (IMF) loan programme.

According to the State Bank of Pakistan (SBP), the currency has remained stable at Rs141.39 at the inter-bank market for over one month now. The PM and his economic team, however, did not clarify whether or not they would let the rupee depreciate at the inter-bank market under the IMF bailout deal.

The meeting asked the dealers to buy Saudi Riyal at Rs38.20 and sell it at Rs38.35, respectively. They would buy and sell UAE dirham at Rs39.05 and Rs39.20, respectively. "The ECAP will not stand by any company diverging from these set rates. The ECAP will not stand with the companies running dual sets of rates," he added.

PM constitutes committee

Imran Khan directed his economic team to form a committee to implement the determined exchange rate of various foreign currencies. Besides, the committee would also look into the issues to be highlighted by the exchange companies and currency dealers from time to time.

The committee would include members from the SBP, the FIA, and currency dealers. The Pakistan Forex Association President Malik Bostan added that Adviser to PM on Finance Abdul Hafeez Shaikh said he was available any time to facilitate currency dealers.

The SBP Governor Dr Reza Baqir said they would hold a follow up meeting at the central bank soon,

$160b transferred abroad

Malik Bostan informed the meeting that currency exchange firms have facilitated people to transfer around $160 billion abroad through legal channels in the past 23 years. "People would have transferred more dollars aboard using illegal channels (like hundi and hawala), he said.

He said the volume of transferred dollars was much larger than the total foreign debt of the country worth $100 billion as of today. He said the exchange companies have brought $13 billion in Pakistan since 2010. It provided $1.2 billion to the current government through banking channels.

He said they were capable enough to help bring more and more dollars into Pakistan if the government let them sign an agreement with foreign exchange firms. "We are bringing dollars through only five foreign exchange firms, while banks in Pakistan are attracting workers remittances through such 500 foreign firms," he informed the meeting.

He said they were providing around $1.5 billion to the government through banking channels and if they are allowed to increase dealing with more foreign firms then they have the capacity to supply $3-4 billion per year to the government.

He told the meeting that the government has allowed people travelling abroad to carry $10,000 each and urged them to cut the amount to $3,000 to avoid capital flight. He also urged meeting to check to smuggle of foreign currencies at Afghanistan and Iran boarders.