Karachi, September 10, 2023: The Pakistani Rupee (PKR) is likely to continue its recovery against the US dollar in the coming week, buoyed by a major crackdown on currency smuggling and hoarding initiated by authorities.
On Friday, the highly volatile rupee experienced its strongest session in over a week following a government-led crackdown against illegal currency smugglers, hoarders, and black market operators. The increased sale of dollars by exporters and the return of remittances to the interbank market, driven by the narrowing gap between the official and kerb market rates, have contributed to the rupee’s newfound strength.
READ MORE: PKR Appreciates by 8% to US Dollar in Open Market Amid Massive Crackdown
After hitting a record low of 307.10 against the dollar on September 5, 2023, and closing at 305.64 on Monday in the interbank market, the rupee has staged a remarkable recovery. It concluded the week at 302.95 to the dollar, marking a 1.4 percent increase over three consecutive trading sessions.
Currency dealers attribute this upward trajectory to substantial dollar sales by exporters, which has bolstered the rupee in the interbank market. They anticipate that the rupee’s ascent will persist in the days ahead.
READ MORE: PKR Maintains Winning Streak Against Dollar for Third Consecutive Day at Interbank
At the outset of September, the kerb market witnessed the rupee plummeting to 333.7 against the dollar, resulting in a nearly 9 percent disparity between the two currency markets, far exceeding the International Monetary Fund’s target of 1.25 percent. However, this gap has now narrowed to just 1.3 percent.
As the week concluded, the rupee was trading at 302 against the dollar in the open market. Administrative measures aimed at curbing smuggling, encouraging hoarders to sell their holdings, dismantling cartels, and intervening verbally to discourage arbitrary price fixing have played a pivotal role in stabilizing the rupee. These efforts have led to a gain of 4 rupees against the dollar in the interbank market and 26 rupees in the open market.
READ MORE: Pakistani Rupee Makes Sharp Recovery to End at PKR 304.94 to the Dollar
The stringent actions began with a meeting between the country’s Army Chief and businessmen, where promises were made to address economic issues. Subsequently, a series of measures were implemented, including acknowledging smuggling as a significant issue on the western borders, stringent actions against money changers, expediting initiatives for investment facilitation, crackdowns on dollar smuggling and black market activities, and enhanced supervision in the forex market.
Finance Minister updates indicate that the International Monetary Fund review is scheduled for November, with expectations of the second tranche being realized by December. If these developments transpire, the rupee is likely to remain stable, and inflation is expected to subside.
READ MORE: PKR Recovers Against US Dollar in Volatile Interbank Trading
Additionally, the State Bank of Pakistan has announced significant structural reforms for exchange businesses, aiming to consolidate and transform them into a single category with a clearly defined mandate. This move comes in response to frequent regulatory issues and weaknesses in the exchange companies’ sector. The SBP has also increased the minimum capital requirement for exchange businesses from Rs. 200 million to Rs. 500 million, with compliance expected by December 31, 2023.
