In a significant effort to curb dollar outflows, the State Bank of Pakistan (SBP) has made it obligatory to open an account before purchasing more than $2,000 in U.S. currency.
State Minister for Finance Aisha Ghaus Pasha notified the Senate’s Standing Committee on Finance, which met in Islamabad on Wednesday, of this development.
The government and the SBP have adopted a number of measures to restrict dollar outflows. Finance Minister Ishaq Dar, who expressed confidence in meeting the external account requirements for the current fiscal year, has been criticised for failing to lower the dollar rate below Rs200 and replace the country’s diminishing foreign exchange reserves.
Restrictions on the creation of letters of credit (LCs) have already impacted industrial activities, as numerous sectors have complained of a lack of raw materials and components. Importers estimate that the value of the stuck-up LCs could be approximately $1 billion despite the lack of official data.
Concurrently, importers are discovered in a lengthy line to obtain approval for LC opening. This is difficult since the banks are experiencing inadequate dollar inflows, making it more difficult to meet importers’ demand. The decline in imports, especially of raw materials, has posed a significant difficulty for the export industry.
The All Pakistan Textile Mills Association has recently asked the prime minister to prevent the collapse of the export business due to the sudden cessation of gas supply in Sindh and Balochistan. According to exporters, November was the worst month for the export industry, and the country could experience another shock due to poor revenues.
A senior banker stated that the central bank has been attempting to seize every single dollar and making outflow more difficult. As the outflow from credit cards increased, banks that had previously issued international credit cards freely were likewise prohibited.
According to bankers, the requirement to register an account before purchasing $2,000 would be exceedingly challenging. Today, banks do not provide foreign currency accounts. It is now nearly hard to travel abroad with dollars. The only option is to acquire money via the hawala market at significantly inflated rates.
The hawala market provides 20 to 30 rupees more per dollar than the banking market. According to some exchange businesses, the hawala dollar rate is much greater than Rs260.
Under the new condition, dollar purchases, checks, and bank accounts must be supported by documentation. The State Bank has made it mandatory to purchase dollars using bank account transfers.
The overall cost of purchasing dollars has been reduced by 50 percent, from $10,000 to $5,000. However, the new requirement of opening bank accounts prior to purchasing dollars is nearly suffocating official channel outflows.
The exchange corporations publish daily rates, but they do not supply dollars to purchasers. Instead, they lament the absence of sellers on the market.