Dealers allowed to buy dollars from interbank market

KARACHI: State Bank of Pakistan (SBP) has allowed authorized dealers to purchase dollars from the interbank market to settle cross-border transactions using International Payment Schemes (IPS).

In a notification issued Wednesday, the central bank stated, “In view of representations received from stakeholders, it has been decided to allow authorized dealers to purchase USD from interbank for settlement of card-based cross-border transactions with IPS [such as Visa, Mastercard etc].”

The notification was applicable with immediate effect and would remain in place till July 31, 2023, the SBP said.

Previously, authorized dealers were only allowed to purchase USD for such transactions from exchange companies.

Exchange Companies Association of Pakistan General Secretary Zafar Paracha termed the SBP notification a “welcome move”, saying that it would reduce the widening gap between interbank and open market exchange rates.

In recent days, the local currency has been trading over Rs300 against the US dollar in the open market. Dealers reported that the rupee’s open market rate was between Rs313-316 per USD on Tuesday. Compared to the interbank closing rate of Rs285.47 issued by the SBP on Wednesday, the difference comes to around Rs27.53-30.53.

Any significant difference between the official and kerb markets’ rates encourages transactions outside the formal banking system.

The growing difference between the two rates is pressuring the central bank to devalue the currency in addition to enticing Pakistani expatriates to send money home through shady means i.e., hawala.