The State Bank of Pakistan (SBP) has recently imposed a maximum limit on the spread between the buying and selling rates of foreign currencies in open foreign exchange market and decided that the maximum spread allowed between the buying and selling rates of foreign currencies must not exceed 25 paisas at any given time.
It is a very good decision by SBP but many questions come in readers’ minds:
(1) Exchange companies were created in Pakistan about 10 years ago but why did it take that long for the SBP to come up with such an important decision now?
(2) What effective mechanism SBP has put in place to ensure this directive is followed by exchange companies in letter and spirit?
(3) What about spread between the buying and selling rates of foreign exchange in interbank market? Is there any limit of bank spread on this transaction? If yes, what is the banks’s spread?
I believe limit on spread between the buying and selling of foreign currencies both in the open as well as in the interbank market is beneficial for both sellers and buyers and, therefore, it is good for country’s economy.
