The Exchange Companies Association of Pakistan (ECAP) will lift the US dollar cap to curb “artificial” demand for the greenback.
The State Bank of Pakistan, exchange companies, and the black market all trade the dollar.
After a meeting of ECAP members on Tuesday, the association announced it was lifting the US dollar cap in the “nation’s interest” due to its negative effects.
“There was artificial demand in the market as people would buy the dollar from us and sell it in the grey market,” the association stated, highlighting the impact of different rates.
People are choosing this shifted business from official channels to grey ones, hurting reserves and exchange companies.
The association explained that removing the cap would cause customers to switch from the grey market to legitimate channels.
After the meeting, ECAP Secretary General Zafar Paracha talking to the local news channel ‘Geo News’ said that 90% of demand was “fictitious”—people bought dollars from official channels and sold them to illegitimate dealers.
“This step gives people the true value of their money. The market will benefit from rising dollar supply and falling demand.”
Paracha predicted that the dollar would trade at Rs254-257—close to the black market price—despite market forces determining rates.
“I am hopeful that things will move in a better direction,” Paracha said when asked if Finance Minister Ishaq Dar would lift the dollar cap.
The ECAP secretary general said the dollar’s value had increased against the rupee in the last 8-10 days, closing at 230.40 in the interbank market today.
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