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Rupee recovers against USD after new credit card settlement directive

KARACHI: The US dollar (USD) suffered a significant loss versus the Pakistani rupee (PKR) on the open market on Thursday.

According to the State Bank of Pakistan, the Pakistani rupee (PKR) fell PKR25 versus the US dollar, which was trading at Rs290 in the open market.

In order to close the currency rate gap between the official and kerb markets, the central bank has authorized banks to purchase dollars from the interbank market in order to settle international card payments. This action comes after the International Monetary Fund (IMF) recommended that Pakistan resolve its currency market concerns before continuing a $6.5 billion bailout program.

In response to stakeholder comments, the State Bank of Pakistan (SBP) released a circular indicating that approved dealers can now purchase USD from the interbank market to settle card-based cross-border transactions with international payment systems such as Visa and MasterCard. These standards go into effect immediately and will remain in effect until July 31, 2023.

To settle card-based cross-border transactions, banks formerly had to obtain US cash from exchange businesses. Due to the limited availability of foreign currency, debit/credit card purchases on international websites and stores could only be settled by banks purchasing dollars on the open market. The rising use and acceptance of digital instruments in Pakistan have brought this issue to the forefront.

According to the SBP’s quarterly payment system analysis, Pakistan has seen a considerable increase in the use of digital payment instruments. 76.7 percent of all cards in circulation are debit cards (37.1 million), 19.1 percent are social welfare cards (9.2 million), 4 percent are credit cards (1.9 million), and 0.2 percent are prepaid cards.

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