Banks and exchange companies are facing increased pressure to lower the dollar rate below current market levels, sources from the financial sector have revealed.
According to a report published by Dawn, a key meeting in Islamabad on Monday, attended by senior officials from the State Bank of Pakistan (SBP), the Ministry of Finance, and bankers, discussed steps to stabilise the exchange rate and bring down the value of the dollar. However, some bankers voiced concerns that the government’s target exchange rate does not align with market conditions.
“There is no clarity on the specific dollar rate the government wants, but the directive is clear — keep it low,” a banking source said. Banks have been instructed to sell dollars to importers at reduced rates, and exporters have been advised not to demand premiums on foreign exchange proceeds.
Despite the SBP’s continued engagement with commercial banks, the demand for dollars remains high due to persistent shortages. Importers report difficulties in opening letters of credit (LCs), with banks charging up to Rs2.50 per dollar above quoted rates. Bankers also noted that the SBP is determined to further reduce the dollar rate, regardless of market pressures.
A recent crackdown on dollar smuggling to Afghanistan and Iran, launched on July 23, has provided some relief, with the interbank rate declining by Rs1.39 over three working days and exchange companies reporting a drop of Rs1.175 in the open market.
However, concerns persist. Bankers caution that artificially lowering the dollar rate could push demand into the informal market, echoing the situation from two years ago. “Suppressing the dollar against market fundamentals risks creating an illegal parallel market,” said one banker.
Currency experts suggest that the dollar could trade at Rs280 soon, though no clear justification was offered. They highlighted that the SBP’s aggressive dollar purchases, totaling $9bn in FY25, have contributed to the ongoing shortage.
The financial sector is also monitoring the Pakistan Remittance Initiative (PRI), a joint effort by the SBP, Ministry of Overseas Pakistanis, and Ministry of Finance. The government has allocated Rs86bn in incentives for banks in FY26, but after criticism over profiteering, cuts to these payments are being considered, sparking concerns that it could impact remittance flows, which reached a record $38.3bn in FY25.
