ISLAMABAD
In an interesting development, the finance ministry has sought report from the Governor State Bank of Pakistan (SBP), within ten days by conducting inquiry into the sharp decline in Pak Rupee against US dollar in the interbank market on 5th July 2017.
However, the finance division has further directed the SBP that the inquiry should not include two most important members of the Monetary and Fiscal Policies Coordination Board, including the finance minister and finance secretary, as they were not taken on-board on the matter.
It is important to mention that under the State Bank of Pakistan Act 1956, the Monetary and Fiscal Policies Coordination Board – comprising of the Federal Minister for Finance Ishaq Dar (Chairman) and other members, including governor SBP and finance secretary – is responsible for coordinating the exchange rate policy as well as the fiscal and monetary policies, to ensure consistency among macroeconomic targets.
The finance minister had claimed at a media briefing on July 6 that he and finance secretary, were not taken on-board on the matter. He claimed that the decision was made due to communication gap between individuals and institutions. Even one deputy governor of SBP was not aware what the other deputy governor was doing, he claimed.
An official statement said, the finance division has officially asked the governor, State Bank of Pakistan (SBP), to initiate an inquiry into the sharp deterioration of PKR-USD exchange rate in the interbank market on 5th July 2017, and to send a report in this regard within a period of ten days.
The inquiry has been recommended by the Finance Minister, Ishaq Dar, in his capacity as Chairman of Monetary and Fiscal Policies Coordination Board. It may be recalled that, after concluding a meeting on this matter with the presidents and CEOs of banks on 6th July 2017, the finance minister held a press talk in which he conveyed that a detailed inquiry will be held into the matter, and those responsible will be held to account.
The PKR-USD exchange rate in the interbank market deteriorated by 3.1 percent, coming down from Rs 104.90 per USD on 4th July 2017 to Rs 108.25 per US$ on 5th July 2017. The sudden depreciation of PKR versus the USD led to speculation and anxiety in the foreign exchange market.
On the same day, i.e. 5th July 2017, the Finance Minister took immediate notice and took action on this matter. He called for a detailed report from the State Bank of Pakistan (SBP) on this artificial and unnatural deterioration in the PKR-USD exchange rate, and he called an emergent meeting with presidents and CEOs of banks on 6th July 2017.
The finance minister’s immediate notice and action resulted in stabilization of Pak-USD exchange rate in the interbank market to Rs. 105.50 per US$ on 6th July 2017 when the financial markets opened.
