“The tendency among masses to use foreign currency in parallel to domestic currency is very dangerous and cannot be countered by statements. Sometimes their trust in the dollar encourages commercial banks to hold more US dollars than the central bank, hence triggering a fall in the rupee value,” said ICCI President Atif Ikram Sheikh while talking to a group of traders.
“The reason for quick dollarisation is the negative return given to depositors which leaves many with no option but to prefer dollars in order to reduce risks associated with inflation and currency depreciation,” he added.
This was where the State Bank of Pakistan could play an important role, he noted and said the situation could only be controlled by taking economic measures.
