The Pak rupee started recovering Tuesday and surged by Re1 against the dollar on the local currency market as the federal government Monday took notice of the record appreciation in the value of the US currency trading above Rs 99 on the open market a day earlier.
Realization of the foreign pledges is another source the government is pinning hope in as Islamabad expects the transfer of over $ 600 million US war reimbursements in various installments by next month.
Also, a breakthrough is expected in the realization of $ 800 million under privatization proceeds of the PTCL as a team of the utility’s buyers from Etisalat is due today (Wednesday) to discuss the long-standing issue with local authorities.
Tuesday saw the rupee gaining Re 1 and 25 paisas, respectively, on the open and inter-bank market where the dollar traded at Rs 98.50 and Rs 97.90 against Monday’s Rs 99.50 and Rs 98.15.
Though government officials denied it, the market sources claimed that the central bank must have injected some liquidity to brake the historic upsurge of the greenback against the local currency.
“Today the dollar depreciated by Re 1 and we by next week would see further downfall,” State Minister for Finance and Investment Saleem H. Mandviwala told reporters here at the office of Board of Investment.
Pointing finger at the “speculators”, the minister claimed to have devised an “action plan” based on a series of short-term remedial measures to bring the dollar down to below Rs 90 level “as soon as possible”.
“I feel the dollar is over-valued in Pakistan,” said the minister.
According to Mandviwala, the governmental steps include: Banning the dollar’s forward booking by importers through banks, curbing the smuggling of foreign currencies to foreign countries, like Dubai, mobilizing the Federal Intelligence Agency (FIA) against more than 30,000 unregistered foreign exchange companies operating in Pakistan, giving banks-like incentives to the money exchangers under the Pakistan Remittance Initiative (PRI) scheme, disallowing banks to maintain huge dollar reserves and constant monitoring of the inter-bank market.
“We would regularly be monitoring the implementation of theses measures,” said the minister who intends to set an ambitious target of $ 20 billion for worker remittances from fiscal year 2014.
Giving an account of Monday’s meeting at the State Bank, Mandviwala said in the meeting none could find a reason for the dollar’s current surge, but all concluded was that the “media hype” did this.
“Speculations on forex reserves and the government’s inability to meet its foreign financial obligations brought us this situation,” he said.
Reacting to speculations, the minister said, the country would be left with reserves of 4-5 months in hand even if all its financial obligations were cleared.
In Monday’s meeting, the minister said, when things were detailed some “quite disturbing” figures fronted the participants. “A lot” of foreign exchange, around $10-12 million, is illegally being exported abroad every day, he said adding that around 80 percent of the smuggled money was going to Dubai.
“This has to be stopped. No currency should go abroad without the State Bank’s permission,” he said. If Pakistan Customs and the Airport Security Force failed to control the smuggling the government, he said, would engage a “third agency” for the task.
“The central bank of Dubai would also be contacted to check the irregularities,” Mandviwala told journalists.
The government also intends to clamp down on the commercial banks which, the minister hinted, were holding billions of dollars in reserves which are to be used as export proceeds. “People retaining the dollar reserves or proceeds are creating liquidity crunch on the foreign exchange market,” he noted with concern. “They would have to surrender these dollars to the State Bank. The inter-bank (market) would be watched,” he said.
Also, Mandviwala said, under consideration were the proposals to ban of forward booking of the dollar by the importers through banks. “Forward booking would be banned if it came out as a reason for dollar appreciation,” he replied a questioner adding that “no one would be allowed to take undue profit
About unregistered currency dealers, the finance minister said over 30,000 illegal firms were “posing a failure” to the regulated exchange firms. He said the FIA would be moved in a crackdown against such unlawful dealers who were damaging the national economy. “The Competition Commission of Pakistan may also be involved,” the minister said.
The minister also announced that from next week the money exchangers would start getting the banks-like incentives under the PRI scheme under which the banks are paid a 6-rupee rebate on the transactions of worker remittances through formal channel.
“I would increase the present $ 13.5 billion remittance target to $ 20 billion from next year (FY14),” the minister declared adding “if we affectively implement these measures there is no reason the dollar would slid back to normal.”
