PKR gains another 6 rupees in kerb, exchange gap shrinks to 0.3%

September 07, 2023 (MLN): The Pakistani rupee (PKR) has strengthened by another 6 rupees against the US dollar in the open market, currently being quoted at 304/307 [12:41pm PST].

To note, in just the last few days, the local unit has gained a staggering 27 rupees, from PKR 331 to PKR 304.

Simultaneously, in the interbank market, the local currency has seen a 2-rupee appreciation in today's session, currently being quoted at 304.89/305.

Remarkably, this narrows the gap between the interbank and open market to a mere 0.3%.

The local currency has appreciated because of the recent reforms introduced by the State Bank of Pakistan (SBP) in the exchange companies sector. The reforms aim to consolidate and transform various types of exchange companies into a single category with a well-defined mandate and higher capital requirements.

The reforms also encourage leading banks to establish wholly owned exchange companies to cater to the legitimate foreign exchange needs of the general public.

Moreover, the ongoing crackdown against speculators, hoarders, and smugglers has also boosted the sentiment. Consequently, the gap between the open market and interbank has fallen significantly around the IMF’s suggested level of 1.25%.

Besides the official Kerb market, the black market for Hawala/Hundi is also experiencing a significant decline in dollar rates.

Previously, the rising demand for dollars due to speculation and smuggling had continually widened the gap between open market and interbank rates, causing significant concern.

On September 04, 2023, the gap surged to Rs25.36 per USD or 8.3%, far exceeding the IMF's recommended threshold.

It is safe to say that the government's initiatives are effectively yielding results in curbing speculative activities in the open market without requiring any intervention on the interbank side.

The situation could further improve if the government takes similar initiatives against gold smuggling, as individuals who cannot purchase dollars may now opt to invest their money in smuggled gold.

Copyright Mettis Link News