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Dar under pressure to ‘manage’ the currency rate

KARACHI: The financial sector has asked Finance Minister Ishaq Dar to stop “managing” the rupee-dollar parity, which is one of the key requirements set by the International Monetary Fund (IMF) for resuming stalled talks for the release of a $1.12 billion tranche. Pakistan’s foreign exchange reserves have fallen to an alarming level, not even enough to cover three weeks’ worth of imports.

Stakeholders are now putting more pressure on the finance minister to end attempts to artificially manipulate the currency rate since this strategy has led to three different sorts of exchange rates interbank, open market, and grey that has essentially been feeding economic volatility.

The finance minister, according to sources, is not yet prepared to adopt the single exchange rate market.

According to sources, the preconditions for restarting negotiations are already on the finance minister’s desk, thus the IMF does not need to physically visit Pakistan. When the conditions are understood by both parties, it makes little difference whether the negotiations take place in person or online.
The finance minister was recently warned by experts and currency traders to quit manipulating the currency since it leads to more volatility than stability.

According to Atif Ahmed, an interbank currency broker, “if a single exchange rate is maintained, instantly the dollar prices would go up but the grey market will evaporate as the rationale for its existence will not be there.”

Currently, it is quite challenging to get dollars at interbank rates due to the State Bank of Pakistan’s (SBP) tight control over the opening of letters of credit (LCs). Although not at the rate they advertise each day, US dollars are accessible on the open market.

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