Govt Presses Banks, Forex Companies to Cut PKR/USD Rate ‘At All Costs’

The federal government is bullying banks and exchange companies to push the US dollar rate below the current rate. Banks have been instructed to keep dollar rates low, although no specific target has been given, reported a news daily. Banks have been told to sell dollars to importers at reduced rates and not allow exporters to demand premiums. Importers reported difficulties in opening letters of credit, with banks charging up to Rs. 2.50 per dollar above quoted rates. Bankers warned that holding the rate below market levels could shift demand to the informal market. The crackdown on dollar smuggling to Afghanistan and Iran since July 23 has helped ease pressure. The interbank rate has dropped by Rs. 1.39, and the open market rate by Rs. 1.175 over the past three working days. However, shortages persist. One expert projected that the dollar may fall to Rs. 280 soon. The SBP has already purchased around $9 billion in FY25 and continues buying in FY26. Meanwhile, the government is reviewing Rs. 86 billion in FY26 remittance incentives to banks under the Pakistan Remittance Initiative. Following criticism over bank profits, cuts are under consideration. Banks have warned that this could hurt remittance inflows.