Exchange Companies Blame Currency Smuggling and Media for Decline in Rupee’s Value

Exchange companies are demanding strong border control to stop Pakistani Rupee’s declining value in the open currency market. They also blame the media for spreading the news about Rupee’s devaluation, as some news channels reported that the US Dollar (USD) will go up to Rs. 135 soon. After the recent increase in USD value in the open market, State Bank of Pakistan (SBP) called meetings with the Exchange Companies Association of Pakistan (ECAP) and other major players of the currency market. Forex Association of Pakistan’s president Malik Bostan and ECAP’s General Secretary Zafar Paracha attended the meeting with SBP’s Executive Director, Syed Irfan Ali. Syed Irfan Ali expressed his surprise over Rupee’s devaluation. He said, In the meeting, it was discussed that due to multiple factors, US Dollar’s value appreciated in the open market. In a week’s time, one USD’s price increased by Rs. 2.8 and reached Rs. 128 on Monday. The open market cooled slightly on Tuesday and the Dollar closed to Rs. 127.80, down by 20 paisas. Malik Bostan drew the attention of SBP officials towards the cross-border trafficking of foreign currency. He said that during elections, security forces sealed Pakistan’s borders with Iran and Afghanistan. This helped curb currency smuggling, especially USD. But in September, the border control loosened security, which enabled foreign currency smuggling again. Exchange companies’ business is also declining because of this. “During August, exchanges companies were handling $7 to $8 million daily. But in September, this figure came down to $3 to $4 million daily. If security agencies implement strict border control, this can help cool the market.” Bostan suggested. Malik Bostan also informed the meeting that there are rumors spreading in the market about Pakistan seeking a bailout from the International Monetary Fund (IMF). The media also aired news about a further devaluation of Rupee and this, in turn, is creating a dollarization panic among the people. “Some media houses aired the news claiming that the government has decided to devalue Rupee, saying that the Dollar will reach Rs. 135 in a few days. This news created a panic among people and they started buying Dollars in bulk.” Malik Bostan told. He also informed SBP that banks are giving up to 90 percent of their loans to Dollar accounts. On the base of this news, foreign currency account holders are taking loans to purchase Dollar from the open market. SBP must ask banks to stop this practice as soon as possible. Zafar Paracha suggested implementing strong border control, curb hundi, hawala, and cracking down against currency smugglers. Law enforcement agencies must be rewarded on taking actions against foreign currency smuggling.