A crackdown on dollar smugglers has resulted in a minor depreciation of the greenback against the Pakistani rupee. However, the currency market is now facing a shortage of foreign currencies as the government’s efforts to artificially lower the dollar exchange rate falter, with market forces continuing to resist the Rs250 target set by authorities.
According to a news report, foreign currencies have become scarce, with reports indicating that the open market is facing a significant shortage. Following a crackdown on dollar smuggling initiated on July 23, the dollar has depreciated by around Rs3 in both the open and interbank markets.
However, this minor shift has done little to narrow the gap between market expectations and official targets. The dollar continues to trade above Rs280, and there is a noticeable shortage in the market.
In recent meetings held in Islamabad with banks, currency dealers, and jewelers, authorities reiterated their desire to bring the dollar to Rs250. However, participants in these discussions described this target as unrealistic. Some bankers suggest that the real market value is closer to Rs281.
Malik Bostan, President of the Forex Association of Pakistan, recently dismissed reports of a currency shortage and claimed that the market was ready to meet demand.
However, currency dealers report a scarcity of major foreign currencies, including the US dollar, British pound, and euro. Most dealers disagree with Bostan and suspect that an illegal parallel market may be driving up the exchange rate.
Market observers say that there is no real shortage, the resistance to price controls is fuelling the perception of one. However, banks with State Bank approval to sell dollars to importers are prioritising their own clients and setting higher rates that are acceptable to buyers.
