Dollar crunch disrupts the forex market in Pakistan

Dollar shortage in Pakistan has created a dislocation in the forex market, with banks offering different rates than inter bank institutions.

Due to their inability to cover import payments, banks are offering higher spreads on import and export transactions than the inter bank market, Tresmark, a treasury market portal, said. To track this new rupee rate, the portal has launched a new ticker.

A delay in the International Monetary Fund’s bailout program has caused the South Asian nation to see a severe dollar shortage this year. Toyota and Suzuki‘s local units have also hit by a parts shortage due to a ban on imports to curb dollar outflows next month, resulting in multiple days of production stops. There was a sharp drop in the rupee’s value as a result of the deteriorating external finances of the country. 

A dollar rate of about 8% higher than the official closing rate was provided by banks last week to energy companies. Previously, importers received overseas payments in a day, according to Raheel Ahmed, chief executive officer at V.N. Lakhani and Co., a steel importer in Karachi.

At Pakistani central bank, there is a severe shortage of dollars due to the global financial crisis. A series of record lows have reached by the currency this year, and it has lost more than 30% of its value so far.

Pakistan expected to received 1.2 billion dollar 

On July 26, Finance Minister Miftah Ismail told Tabadlab that in a few weeks, the nation’s inflows of dollars will surpass its imports. Whenever that happens, the rupee will no longer be under pressure.”

It is expected that Pakistan will receive $1.2 billion for its development program after the IMF’s board meeting on August 24th. There is also a possibility of a bilateral financing contribution of $4 billion from Saudi Arabia.

Also See: Export-Oriented Sectors Saw Gas Prices Rise by 82%

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