Pakistan restricts interbank trade to curb dollar shortage: report

Pakistan’s central bank is discouraging interbank trading amid a severe dollar shortage, sending the rupee to its worst weekly drop since 1998, people familiar with the matter said.

State Bank of Pakistan has asked commercial lenders to manage import payment requirements from their own inflows, such as exporters’ deferrals and remittances, the people said, speaking on condition of anonymity amid discussions about private consultations. If the bank must borrow anyway, it must seek permission from the monetary authority, the people added.

State Bank of Pakistan did not respond to an email seeking comment.

Last week, the rupee fell by about 8%, the biggest drop in more than two decades, as Pakistan’s foreign exchange reserves are enough to cover less than two months of imports. Still, SBP Acting Governor Murtaza Syed told Bloomberg that the country will comfortably meet its financing needs with an International Monetary Fund bailout.

Some banks seek the SBP’s permission and provide dollars at a premium, which increases costs for their customers, according to other people familiar with the matter. Banks provided dollars to energy companies at rates of 238 rupees and 242 rupees to the dollar on July 20, about 8% higher than the official closing rate for the day, the people said. The more expensive payouts were first reported by the magazine Profit.

Banks that earlier cleared foreign payments within a day now need more than a week, said Raheel Ahmed, chief executive officer at VN Lakhani and Co., a Karachi-based steel importer.

Pakistan has experienced dollar pressure due to energy payments, Finance Minister Miftah Ismail said at a July 21 press conference in Islamabad. The trend will reverse as there will be more supply of dollars than demand next month, Ismail said.

Dear Reader,

Business Standard has always strived to provide up-to-date information and commentary on events of interest to you that have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these difficult times arising from Covid-19, we remain committed to informing and updating you with credible news, authentic views and incisive commentary on the important issues of the day.
But we have a request.

As we struggle with the economic fallout of the pandemic, we need your support even more so we can continue to bring you more quality content. Our subscription model has seen an encouraging response from many of you who have subscribed to our online content. More subscriptions to our online content can only help us achieve our goals of bringing you even better and more relevant content. We believe in free, fair and credible journalism. Your support with multiple subscriptions can help us deliver the journalism we are committed to.

Support quality journalism and order on Business Standard.

Digital editor

Elvira Parkinson

"Alcohol scholar. Hardcore tv junkie. Wannabe bacon enthusiast. Twitter fanatic. Subtly charming travel guru. Pop culture specialist."

Leave a Reply

Your email address will not be published.