PKR soars against US dollar in open market after SBP decision

In a significant development, the Pakistani rupee experienced a substantial increase in value against the US dollar in the open market on Thursday. This surge came after the State Bank of Pakistan (SBP) permitted banks to purchase dollars at the interbank market rate for settling international credit card payments.

According to Malik Bostan, Chairman of the Exchange Companies Association of Pakistan (ECAP), this marks the first time that the dollar rate has dropped by Rs27 in Pakistan. Bostan praised Finance Minister Ishaq Dar and the SBP governor for promptly taking action based on his advice, which greatly contributed to the rupee’s strong performance against the dollar.

Bostan explained that commercial banks were buying dollars from the open market at a high rate for credit card settlements. When the dollar reached Rs315, Dar reached out to Bostan to inquire about the growing gap between interbank and open market rates. Acting swiftly, the finance minister issued a circular to address the issue.

Bostan emphasized that this is a trial period until July 31, expressing optimism that the rupee’s value will continue to rise. He also highlighted that this move would benefit pilgrims who previously purchased dollars at Rs315, as they can now obtain the currency at a much lower rate of Rs285.

Prior to the SBP decision, the ECAP reported that the dollar was being exchanged at Rs300 in the currency market, while it closed at Rs311 the day before. This step by the SBP was also in response to the International Monetary Fund’s demand that Pakistan stabilize its currency market before resuming a $6.5 billion bailout program.

The analysts had anticipated a decline in the value of the rupee following the implementation of these new guidelines. Zafar Paracha, the general secretary of the ECAP, praised the SBP for making the right decision at the right time, predicting a drop of 20 to 25 rupees in the open market currency rate. He further noted that reducing the disparity between official and unofficial market rates would encourage more transactions through the formal banking system and boost remittance inflows.

Since January of this year, the rupee has experienced a depreciation of 23.6% in the interbank market.