The government has been advised by the Exchange Companies Association of Pakistan (ECAP) to “set” the dollar rate to lessen currency market volatility as the country fights a severe economic crisis and declining foreign exchange reserves.
The general secretary of ECAP Zafar Paracha said in a statement on Monday, “It is advised to fix the rupee/dollar exchange rate for export-import bills and remittances”. He further said these remittance proceeds could be received by banks and money changers at a fixed rate of Rs240 per dollar.
Pakistani rupee closed at Rs228.34 per US dollar, compared with the previous close of Rs228.15 in the interbank market. In the open market, the local unit was trading at Rs238.75 against the greenback.
Paracha suggested the government to set the rate of Rs240 per dollar for overseas Pakistanis and for inward remittance.
He expects that by making the change, the official channel would be strengthened, remittances would increase, Hundi/Hawala would decline, and eventually, the grey market would vanish.
According to Paracha, the exchange rate between the dollar and the local currency has hit Rs267 to Rs270. The offer could be made at Rs228 against/ the dollar in order to obtain exporters’ revenues. Additionally, the rate for importers would be determined by the weighted average of the exporter and home remittance rates. He said that it would help remittances and exporters.
It will boost the nation’s foreign exchange reserve, encourage exporters to bring dollars, and strengthen the exchange companies’ remittances division.
The country received $14.1 billion in remittances during the first six months (July-December) of the current fiscal year, a decline of 11.1 per cent from a year earlier.
As of January 6, Pakistan’s foreign exchange reserves at the State Bank of Pakistan fell by $1.2 billion to $4.3 billion, just enough to fund three weeks’ worth of imports.
Due to significant repayments of foreign debt and a lack of external funding, which have severely reduced Pakistan’s foreign reserves and resulted in ongoing dollar shortages, the country is currently facing a balance of payments crisis.