The Pakistani rupee (PKR) has exhibited significant strength against the US dollar, both in the open and interbank markets.
Currently, the exchange rate in the open market hovers around 301/305 PKR per USD, while in the interbank market, it stands at approximately 302.74/302.84 PKR per USD.
Over a span of just four days, the Pakistani rupee has demonstrated remarkable gains, appreciating by approximately 30 rupees or nearly 10%. This surge has seen the exchange rate shift from 331 PKR to 301 PKR per USD, signifying a substantial transformation.
The catalyst for this surge can be attributed to the State Bank of Pakistan’s (SBP) recent modifications in the operational framework of exchange companies. These alterations aim to enhance the organization and impose higher capital requirements on these companies. Furthermore, prominent banks have been encouraged to establish their own exchange companies to cater to public foreign exchange needs.
In tandem with these reforms, the government has initiated stringent measures against individuals engaging in speculation, hoarding, or illicit money smuggling. These actions have contributed to narrowing the gap between open market and interbank exchange rates, which now align more closely with recommendations from the International Monetary Fund (IMF).
Even the unofficial black market for currency transfer, known as Hawala/Hundi, is experiencing a decline in dollar rates. Previously, rampant speculation and smuggling had exacerbated the disparity between open market and interbank rates, raising concerns. However, government initiatives are now effectively curbing these issues without necessitating interference in interbank rates.
If similar strategies are implemented to combat gold smuggling, it could further bolster economic stability. Some individuals have turned to investing in smuggled gold as an alternative to purchasing dollars, underscoring the importance of addressing this aspect as well.
It was also reported that the black market rate has dropped near to the Bank rate but the government’s latest crackdown has driven these players underground; so reporting of street rates remains largely blank. Smuggling channels have broken off the relaying of buy/sell orders to steer clear of state crackdown, for now.
Pertinently, the Pakistani rupee is down nearly Rs83 since January 2023. Since April 2022, it is down over Rs130 against the greenback. As per exchange rate movements witnessed today, the PKR has gained over Rs1.9 against the dollar.
