With a boom witnessed by the black Market, the currency dealers decided to remove the cap on the US dollar from Wednesday (today), hoping to end the surging “artificial” demand for the greenback.
The move comes as the country is witnessing a dollar shortage resulting in a depreciating rupee as the greenback is currently being traded at three different rates — the official determined by the State Bank of Pakistan, of the Exchange Companies, and the one in the black market.
In this connection, the Exchange Companies Association of Pakistan (ECAP) issued a statement on Tuesday after a meeting in which it was stated that they were withdrawing the cap on the US dollar as the limit was causing adverse effects.
There is artificial demand in the market as people would buy the dollar and sell the same in the black market, the statement mentioned, highlighting the impact of different rates.
As a result of the people opting for this, the business was shifting from official channels to the grey ones, hurting not only the reserves but also dealing losses to the exchange companies.
Explaining the reason behind the removal of the cap, the association said once the dollar was allowed to trade at the market value, the customers would automatically shift from the grey market to the legitimate channels.
ECAP General Secretary Zafar Paracha told a private TV channel that as much as 90 percent of the demand was fictitious. “Through this step, we aim to provide people with the actual value of their money. Supply of the dollar will increase and demand will come down; it will have a positive impact on the market.”
Paracha added that although the rates would be determined by market forces, he foresaw the dollar being traded at Rs254-257 — close to the price in the black market.
In response to a question whether he believes Finance Minister Ishaq Dar would remove the cap placed on the dollar, Paracha said: “I am hopeful that things will move in a better direction.”
The ECAP general secretary said the dollar’s value had increased against the rupee — which closed at 230.40 in the interbank market on Tuesday – in the last 10 days.
Paracha said, “Things will become better as all the forums, including the International Monetary Fund (IMF), are demanding the removal of the artificial cap.”
He added that if this intervention did not work, the association would meet again later in the week to discuss the future line of action.
The ECAP secretary general noted that the remittances — which dropped 19 percent in December to $2 billion from $2.52 billion in the same month of 2021 — would also witness an increase after the cap’s removal.
The post Exchange companies remove cap on dollar to fight black market appeared first on TheCorrespondent.PK.
