Forex association reports around $1bn deposited into banks after crackdown

Currency dealers' daily average trading volume surges from $5-$7 million to an impressive $50 million

Sustained efforts to combat illegal forex trading and the smuggling of foreign currency have led to approximately $1 billion being deposited in banks, as reported by the Exchange Companies Association of Pakistan (ECAP).

Zafar Paracha, General Secretary of the Exchange Companies Association of Pakistan (ECAP), said, “Since the crackdown began in September, we have successfully deposited an estimated $800 to $900 million in banks, reflecting commendable results.”

As a direct result of these actions, exchange companies’ daily average trading volume has surged from $5-$7 million to an impressive $50 million. Paracha added, “We are now consistently selling up to $40 million per day to the banks, with an unprecedented influx of funds from overseas Pakistanis.”

Currency dealers have praised the effectiveness of administrative measures, which have yielded positive outcomes for Pakistan’s economy. Policy reforms aimed at curbing Afghan transit abuse and the smuggling of Iranian oil have also played a role in preserving foreign exchange reserves.

Remittances channeled through exchange companies have seen a substantial increase of 10 to 15 percent, with expectations of a corresponding rise in inflows through banks. Dealers in the banking sector anticipate that remittances in September will increase by 25 percent, reaching $2.5 billion compared to August figures.

On the other hand, State Bank of Pakistan (SBP) has been actively purchasing dollars from the interbank market for debt servicing, precise figures remain undisclosed. As of September 28, the SBP held reserves amounting to $7.6 billion.

Bankers noted that the interbank market is witnessing heightened inflows due to the daily depreciation of the dollar, prompting exporters to sell their dollar holdings. They said that the SBP is not intervening in the exchange rate, and import restrictions have curtailed dollar outflows.

The government’s measures to reduce imports have also led to a decline in the current account deficit to $2.4 billion in FY23, down from $17.5 billion the previous year.

In the open market, the dollar depreciated by Re1 to Rs280.50 on Monday. Dealers noted that sellers have been prevalent in the market, while buyers are relatively scarce, reflecting reduced demand for dollars.

Experts suggest that the reforms in the Afghan Transit Agreement hold promise for Pakistan’s long-term economic stability, as the agreement has historically been susceptible to exploitation by smugglers on both sides of the border.

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