On Thursday, the Pakistani rupee was substantially appreciated against the dollar in the open market. This comes after the State Bank of Pakistan (SBP) permitted banks to acquire dollars at the interbank market rate to resolve international credit card payments.
In a historic move, the dollar rate plummeted by Rs27, a first in Pakistan, as SBP allowed local banks to acquire dollars at the interbank market, which led to a robust appreciation of the rupee against the dollar. Commercial banks previously procured dollars from the open market at elevated rates for settling credit card payments.
Upon the dollar peaking at Rs315, the finance minister sought an explanation from Malik Bostan, Chairman Exchange Companies Association of Pakistan (ECAP), regarding the growing disparity between interbank and open market rates. Subsequently, the finance minister promptly issued a circular.
Bostan forecasts a further strengthening the rupee rate while viewing the period until July 31 as a testing phase. However, he anticipates that the new measures will benefit pilgrims who were previously purchasing dollars at Rs315. Now, they can obtain the dollar at a significantly lower rate of Rs285.
Read: SBP Allows Dealers to Buy Dollars from Interbank Market: A Welcome Move
Previously, the ECAP reported the dollar trading at Rs300 in the currency market, a drop from Rs311 the previous day.
In addition, the SBP’s decision aligns with the International Monetary Fund’s stipulation that Pakistan regulates its currency market before restarting a $6.5 billion bailout program.
The central bank’s circular states, “In response to stakeholders’ representations, Authorized Dealers are now allowed to purchase USD from Interbank for settling card-based cross-border transactions with IPS [international payment schemes].”
Analysts had predicted a decline in rupee value post-implementation of the new guidelines. However, the ECAP general secretary, Zafar Paracha, supports the SBP’s timely decision, expecting it to reduce the open market currency rate by 20 to 25 rupees.
The rupee has decreased by 23.6% since the start of the year in the interbank market.
