Black forex market

Ensuing uncertainty on economic front due to a long eluding IMF deal is a major contributor to rise in rate of dollar

June 19, 2023


The emergence of a black forex market — due to an enticing gap between the inter-bank rate and the open market rate — continues to cost Pakistan dear in terms of the volume of remittances. The latest SBP data shows that the country lost $3.7 billion in remittances during the first 11 months of FY23, primarily due to the wid¬ening exchange rate gap. Even though over the last couple of days, the gap between the two rates has shrunk to something around Rs10 — thanks to the government allowing debit and credit card transactions on the bank rate — it has mostly been in excess of Rs20 per dollar, thus luring the remitters towards the illegal channels of money transfer.

A fresh $1 billion worth of inflow from China is expected to take off pressure on the supply of dollars, thereby strengthening the rupee a bit further, but such piecemeal measures are, quite understandably, just worth a breather. While the situation warrants timely measures to limit the growing role of the black market that has replaced the currency exchange companies in the country for all practical purposes, the government has failed to address the reason for the decline in the volume of remittances — accounting for 4 per cent month-on-month and 10 per cent year-on-year in the month of May. To the contrary, the SBP permitting importers to arrange dollars for their imports on their own triggered a rush towards the black market — something that further bolstered the illegal market and the consequent rise in the dollar rate caused a further decline in remittances through banking channels.

Also, the ensuing uncertainty on the economic front due to a long eluding IMF deal is a major contributor to the rise in the rate of the dollar. The talk of a plan B is only adding to the financial chaos. The government needs to act — and act swiftly.

Published in The Express Tribune, June 19th, 2023.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.


Replying to X

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ