State Bank of Pakistan asked to ensure adequate dollar supply

Currency dealers meet SBP high-up to discuss issue

KARACHI: Currency dealers have approached the State Bank of Pakistan (SBP) to make sure local commercial banks supply dollars in the open market by accepting other foreign currencies, which are not in high demand in the country.

The dealers asked the central bank to act to make sure the open market continued to operate in case the UAE temporarily suspended flight operations to Pakistan to limit the spread of coronavirus.

Pakistan purchases US dollars in exchange for other foreign currencies from Dubai, the UAE, on a daily basis.

“On an average, we exported around $10-12 million equivalent of other foreign currencies to import US dollars in the past 5-10 days. This is all legal. We do this with the permission of the central bank. The currency trade is strictly monitored and documented on local airports on a daily basis,” Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan told The Express Tribune, after attending a meeting at the central bank on Thursday.

The meeting was chaired by SBP Exchange Policy Department Additional Director Zulfiqar Ali Khokhar. ECAP, which is the representative body of currency dealers, is scheduled to formally table the proposal on the advice of the central bank.

“Banks may provide rupee (the local currency) in exchange for other foreign currencies as well. But they will have to make sure the exchange takes place as per international rates of currencies being quoted by Reuters and Bloomberg,” he said.

Later, commercial banks may exchange other currencies with the central bank. “This would provide a good opportunity to the central bank to build the country’s foreign currency reserves, which is the need of the hour,” he said.

The other foreign currencies include Saudi riyal, UAE dirham, Malaysian ringgit and Turkish lira.

“We want to develop the mechanism (exchanging currencies with banks) to remain on the safe side,” Bostan said.

Earlier, Qatar and Saudi Arabia temporarily suspended flight operations with Pakistan. The ECAP chairman said there was a very little demand for any foreign currencies, including the US dollars, in the open market in the country. “We have been supplying almost 95% of our daily volumes (around $12 a day) to the government through the inter-bank.” 

Published in The Express Tribune, March 13^th, 2020.

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