In a significant development for Pakistan’s currency market, the Pakistani rupee experienced a substantial appreciation against the US dollar on Thursday. This surge followed the State Bank of Pakistan’s (SBP) decision to allow banks to purchase dollars at the interbank market rate for settling international credit card payments. The move, which saw the dollar rate fall by Rs27, marks the first time such a decrease has occurred in Pakistan.
Malik Bostan, the Chairman of the Exchange Companies Association of Pakistan (ECAP), lauded Finance Minister Ishaq Dar and the SBP governor for their swift action in response to his advice. Bostan had highlighted the practice of commercial banks purchasing dollars from the open market at inflated rates for credit card settlements. Acting on this information, Minister Dar promptly issued a circular that facilitated the reduction in the dollar rate.
The new directive is effective until July 31, and Bostan expressed optimism that the rupee’s value would continue to increase during this period. He emphasized that the decision would particularly benefit pilgrims who were previously purchasing dollars at Rs315 but could now acquire them at the lower rate of Rs285.
Earlier, the ECAP had reported that the dollar was being traded at Rs300 in the currency market, with the US currency closing at Rs311 the previous day. The SBP’s decision also aligns with the International Monetary Fund’s demand for Pakistan to stabilize its currency market before resuming a $6.5 billion bailout program.
The analysts had anticipated a decline in the rupee’s value following the implementation of the new guidelines. However, the SBP’s timely and appropriate decision has been well-received. Zafar Paracha, the General Secretary of the ECAP, stated that the directive would likely cause the open market currency rate to drop by 20 to 25 rupees. Additionally, the reduction in the official and kerb markets’ rates is expected to stimulate remittance inflows.
Paracha further explained that a notable differential in rates between the official and kerb markets often encourages transactions outside of the official banking system. By narrowing this gap, the SBP aims to promote more transactions through regulated channels, enhancing transparency and stability in the currency market.
It is worth noting that the rupee has already experienced a decline of 23.6% against the US dollar since the beginning of this year in the interbank market. The new credit card settlement directive marks a significant step toward stabilizing the rupee and improving economic conditions in Pakistan.
Read more: US Dollar dominates Pakistani Rupee in Open Market Trading
Overall, the SBP’s decision to allow banks to purchase dollars at the interbank market rate for credit card settlements has had a positive impact on the Pakistani rupee. The appreciation of the rupee against the dollar not only benefits individuals and businesses engaged in international transactions but also supports the country’s efforts to meet the requirements of international financial institutions. As Pakistan moves forward, it is crucial to continue implementing measures that foster stability and growth in the currency market, ultimately contributing to a stronger economy.
