BBC News
The State Bank of Pakistan has instructed the exchange companies operating in the country to ensure that any person receives cash or remittances of more than US $ 10,000 per day and over US $ 100,000 per annum. Don't buy in case.
The central bank has banned the purchase of dollars beyond a certain limit at a time when the Pakistani rupee is trading at the lowest level in the country's history against the dollar.
The rupee's depreciation began in May of the year and continues to decline. At present, the value of one dollar in the interbank market has crossed 178 Pakistani rupees and in the open market this one dollar is being sold at 181 Pakistani rupees.
Experts are calling the SBP's ban on dollar purchases a step towards curbing US currency hoarding.
According to N, the currency is being hoarded due to the rising value of the dollar and investors are likely to buy and reserve it due to the possibility of further appreciation based on rumors. The SBP is trying to prevent this.
However, according to experts, the move will not have any immediate effect on the rising value of the dollar, which will require the central bank to take steps to reduce imports, which are causing the dollar to appreciate.
What is the SBP initiative?
According to a statement issued by the State Bank of Pakistan (SBP), the bank has amended the rules governing the sale of foreign exchange to individuals by exchange companies, under which any person can form daily cash or external remittances. I will not purchase more than US $ 10,000 and US $ 100,000 per calendar year (or its equivalent in other currencies).
According to the bank, the purchase limit has been set keeping in view the personal needs of the individual for foreign exchange.
According to the bank, the move is aimed at documenting and enhancing transparency in the purchase of dollars and further improving the foreign exchange system, and is a continuation of other measures taken by the SBP to ensure that the public To discourage speculative buying and selling by exchange companies without affecting the market's ability to meet demand.
The statement said that the exchange companies would obtain supporting documents on the sale of more than US $ 1,000 (or equivalent in other currencies) which would indicate the purpose of the transaction and that these companies would not transact on authority letters.The guidelines further emphasize that exchange companies will only conduct transactions at the company's authorized outlets and will not provide delivery services to customers.
What is the purpose of setting a limit on dollar purchases?
Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan, told BBC Urdu about the SBP's move to ban purchases of more than a certain amount of dollars. It has become an attractive source of investment for the dollar and the fact that the dollar is being bought and hoarded individually.
A few months ago, Saudi Arabia announced that it would deposit $ 3 billion in the SBP to support Pakistan's foreign exchange reserves and provide it with $1.2 billion worth of oil a year with the facility of late repayment.
"It's natural to invest where there's a good return, and that's what's happening with the dollar right now," he said.
Zafar Paracha, however, said that the speculation on exchange companies by the central bank is incomprehensible as the companies do not have enough dollars to buy from there and stockpile US currency. He said that commercial banks have more dollars.
Zafar Paracha said that exchange companies buy and sell dollars individually, that is, they buy dollars from an individual and sell them.
Yousuf Saeed, an economics analyst at Darson Securities, said the SBP initiative was aimed at documenting the buying and selling of dollars in exchange companies and bringing greater transparency.
He said that rumors are being circulated in this sector due to the rising value of the dollar as investors find it more attractive to invest in dollars.
Yousuf said the world invests in the land, gold and equities markets, but due to the rising value of the dollar in Pakistan, investors also invest in it. However, there is no individual investment in the forex market in Pakistan. ۔
What are the implications of limiting dollar purchases?
Talking about the SBP setting limits on dollar purchases and its implications, Zafar Paracha said that the move would curb dollar hoarding but would increase the spread of gray market.
The gray market is a reference and hindi market because buyers will go to the gray market when they cannot buy more than one dollar through legal channels. He said that even now the rate of dollar in gray market is higher in interbank and open market.
Yousuf Saeed said the move would also help curb the smuggling of dollars into Afghanistan, where US currency is being bought from Pakistan due to the shortage of dollars.
Paracha said that before the arrival of the Taliban in Afghanistan, US $ 1 million to US $ 1.5 million was being spent daily, but then there was a huge increase when US $ 10 million to US $ 15 million was smuggled into Afghanistan.
However, the smuggling of dollars declined after the SBP introduced a biometric requirement for dollar purchases. He said setting limits on dollar purchases was likely to further reduce its smuggling.
Will setting a limit on dollar purchases improve the value of the rupee?
Talking about the possibility of appreciation of the rupee by setting a special limit on individual dollar purchases by the SBP, Yousuf Saeed said that the main reason for the rise in the value of the dollar in the country was Pakistan's rising import bill. Which is creating imbalances in current accounts and balances.
In the first five months of the current financial year, the country's import bill reached a record high of $ 33 billion, up from $ 19.5 billion in the same period last year, an increase of about 70%.
Yusuf said setting limits on dollar purchases could curb hoarding and smuggling, but the reason for the rise in the value of the dollar was completely different.
He said that due to non-receipt of dollars from IMF, foreign funding from international financial institutions is also not being given to Pakistan while dollars are going out due to imports and this situation has increased the value of dollar. Are causing
He said that with the increase in cash margin on imported goods by the SBP, the government's budget to increase taxes on imported goods is aimed at easing the pressure on the dollar by reducing the import bill.
Zafar Paracha said that the latest move by the SBP would not have any immediate effect on the value of the dollar. He said that the value of dollar is determined by the rate of interbank from where the payment for import is made and on this basis also the rate changes in the open market.
