The recent circular issued by the State Bank of Pakistan (SBP) on May 31, 2023, allowing Authorized Dealers to purchase US Dollar from the Interbank for settlement of card-based cross-border transactions with IPS, has been welcomed by Zafar Paracha, the General Secretary of the Exchange Companies Association of Pakistan (ECAP).
Paracha expressed his approval of the SBP’s decision, stating that it came at the right time and will likely result in a considerable decrease in the open market USD rate, potentially reaching a decline of Rs. 20-25. This move is expected to bridge the gap between the Interbank and Open Market rates, which will be beneficial for the overall stability of the foreign exchange market.
Furthermore, the decision is expected to have a positive impact on the inflow of remittances, which are a significant source of foreign currency for Pakistan. By facilitating card-based cross-border transactions, the SBP aims to encourage more remittances to flow through official channels, ultimately boosting the country’s foreign exchange reserves and strengthening its economy.
The reduction in the open market USD rate will also have broader implications for various sectors of the economy. A lower exchange rate can lead to reduced import costs, benefiting businesses and consumers alike. Additionally, it may encourage domestic industries to become more competitive in the global market, potentially increasing exports and stimulating economic growth.
While the precise effects of the SBP’s decision on the exchange rate and the overall economy remain to be seen, the move is viewed as a positive step toward addressing the disparity between Interbank and Open Market rates. By promoting transparency and facilitating cross-border transactions, the SBP aims to create a more stable and efficient foreign exchange market in Pakistan.
Market participants and industry experts will closely monitor the impact of this decision on the USD rate and the overall economic landscape in the coming weeks and months. The hope is that the reduction in the open market USD rate will contribute to a more favorable environment for businesses, consumers, and remittance inflows, supporting Pakistan’s economic growth and stability.