Pakistan’s central bank is discouraging interbank trading due to a severe shortage of dollars that has pushed the rupee to post its worst weekly drop since 1998, according to people with knowledge of the matter.
State Bank of Pakistan asked commercial lenders to manage import-payment requests from their own inflows, such as exporter accruals and remittances, the people said, asking not to be identified discussing private deliberations. If the bank still needs to borrow, it must seek permission from the monetary authority, the people added.
State Bank of Pakistan didn’t reply to an email seeking comment.
The rupee fell about 8% last week, its biggest drop in more than two decades, as Pakistan’s foreign-exchange reserves are enough to cover less than two months of imports. Even so, SBP Acting Governor Murtaza Syed told Bloomberg the nation will comfortably meet its financing needs with an International Monetary Fund bailout on track.
Some banks are seeking permission from the SBP and providing dollars at a premium, which is raising costs for their clients, according to other people with knowledge of the matter. Banks provided dollars for energy companies at rates of 238 rupees and 242 rupees to a dollar on July 20, about 8% higher than the official closing rate for the day, the people said. News magazine Profit had first reported about the costlier payments.
Banks that previously released overseas payments in a day are now taking more than a week, said Raheel Ahmed, chief executive officer at V.N. Lakhani and Co., a Karachi-based steel importer.
Pakistan has seen dollar payment pressure because of energy payments, Finance Minister Miftah Ismail said in a news briefing on July 21 in Islamabad. The trend will reverse with there being more dollar supply than demand next month, Ismail said.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.