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KARACHI: Amid the daily dollar rate appreciation, banks have doubled their buying of the US currency and are sending it abroad via credit cards while the government grapples to control greenback outflows.
The State Bank of Pakistan (SBP) on Friday reported the closing price of the dollar at Rs236.84, an increase of 96 paise compared to the previous day’s rate of Rs235.88.
The dollar has a strong grip over the exchange rate and the clutch is getting stronger each day amid falling foreign exchange reserves and higher imports.
The open market reported the dollar price at Rs241 on Friday, which was almost the same as on Thursday. Currency dealers said finding dollars and other currencies is difficult since demand is very high.
Speaking to Dawn, currency market experts said the SBP and the government have tight control over dollar buying from the open market, but the banks are providing a way out through credit cards.
“The average banks’ buying per week was around two to four million dollars, which has now gone up to $12m on an average,” said Malik Bostan, the chairman of the Exchange Companies Association of Pakistan (ECAP).
It is extremely difficult to buy more than $500 for a common man from the open market but the official way out has been found. Travellers could take up to $10,000 per person from the country, and now credit cards are in high demand.
The currency dealers said the banks’ dollar buying has sucked away greenbacks from the open market.
“We have asked the government to half the limit for travellers to $5,000,” said Mr Bostan. He also suggested that there should be a spending limit of $2,000 per month on credit cards.
Currency dealers said the government is trying to boost country’s foreign exchange reserves by restricting spending and borrowing from global lenders, but the outflows from banks’ via credit cards could undermine the efforts.
Though the SBP insists there is no curbs, the importers said that opening LCs (letters of credit) for raw materials is not easy. “This is being done as the SBP wants to minimise the import bill,” an importer said.
Banks are also buying dollars from the grey market at much higher rates, claims a currency dealer.
However, the outflow through credit cards has added to the vulnerability of the exchange rate, which further strengthens the US dollar in Pakistan.
Published in Dawn, September 17th, 2022
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On DawnNews
Sep 17, 2022 09:25am
I worked $10,000 to Pakistan and the state bank has frozen my account using some lame excuse I wonder how many people's dollar accounts are frozen... This is disturbing and discouraging me from sending any more dollars.
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Sep 17, 2022 09:39am
Rich are getting all the benefits and ordinary citizens are getting slogans. In between IK is taking advantage of the situation by focusing on power play and protests.
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Sep 17, 2022 09:52am
Ban iPhones, cosmetic products, cars and all luxury items in order to strengthen the rupee.
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Sep 17, 2022 10:00am
Seems like the current govt is not going to win the traders’ community this time around. They don’t have additional funds to spare on their vote bank that will result in no support from the voter. Tough time ahead. Unless, free and fair elections. Investors spend when there is a stable govt. in the country.
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Sep 17, 2022 10:07am
Bostan is implying that the banks have setup fake companies abroad, that are being used to generate and charge amounts in the millions, on most probably made-up credit cards. They're doing this in the name of foreign settlements.
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Sep 17, 2022 10:10am
Close all such banks which are undermining the rupee for their profits
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Sep 17, 2022 10:11am
Banks would not go to such lengths to hoard and then send dollars abroad for safe keeping, unless they believed that the government may have to freeze dollar accounts in the near future, much like what's happening in Sri Lanka and Lebanon. Greece and Cyprus had the same nightmare in 2011.
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Sep 17, 2022 10:13am
$10,000 can’t cover a family of three expense in US or Europe or Dubai for two weeks.
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Sep 17, 2022 10:28am
There is a reason for the CC usage. ,Overseas Pakistanis like me who are also dependent partially on their income in some other country and partially on the income in Pakistan ( I am a tax payer in Pakistan as well), when have to transfer, banks charge 10% of the amount sent abroad through legal means like TT. This started during previous gov ( probably to encourage hundi) and current gov has taken no actions to address the issue. Previously it was approx3000 pak rupees in total
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Sep 17, 2022 10:40am
Years ago, when the rate was PKR 4.76 per USD, wealthy business would ‘sponsor’ smart poor students for study in the US [and likely other countries]. They would then send USD for fees etc, BUT the poor student just deposited that in an account controlled by the businessman; The student worked [illegally] for his living and E duration needs. This credit card scam seems ‘somewhat’ similar. SBP should limit credit cards for use WITHIN Pakistan.
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Sep 17, 2022 10:42am
How much more evidence of PDM incompetence and inability to control things do we need? The longer they delay elections the worse it will be for them. Even Dar and brave lion returning can’t save them now.
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Sep 17, 2022 10:50am
The government and the elite of the country don't learn. Even in these difficult times, they refuse to tighten the belt and reduce the trade deficit. How selfish the rich are, when the country is almost bankrupt.
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Sep 17, 2022 10:50am
SBP is toothless. Letting market dictate rate is one thing, letting it go out of hand is another!
SBP needs to act now
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Sep 17, 2022 10:52am
Since 90s era, I am listening this story. I remember when I was applying for higher studies abroad, nominal fee was required to submit admission form in foreign universities. That was so difficult to transfer from Pakistan because of same type of regulations. In nut shell nothing has been changed for common Pakistani people in last 30 years.
Those who have to transfer money they can send millions of dollars to London, Switzerland or Panama with the hep of Maqsood chaprasi or others.
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Sep 17, 2022 11:03am
It is all the sign of default.
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Sep 17, 2022 11:09am
Unlike cash buying , sending USD via Credit Card is traceable, where is FBR ? Isn’t it their Job to look into this issue ? Probably asleep as usual after taking a nice Judy monetary sleeping pill !
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Sep 17, 2022 11:20am
SBP should take drastic actions against these banks. These banks are nothing but simple crook.
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Sep 17, 2022 11:55am
If online purchases from foreign countries through credit cards are blocked for a specific period of time by SBP Pakistan can stop out flow of US dollars until credit cards will remain blocked.
The suggestion to decrease the amount of dollars from 10,000 to 5,000 for outbound travellers is not a good idea as one needs US currency to spend it abroad for any reason including medical expenses.
There are children who are studying abroad and their educational expenses are also paid in US dollars.
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Sep 17, 2022 12:36pm
@Salman, Everyone tries to take advantage of something in this country. Why should then just close banks?
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Sep 17, 2022 12:49pm
Impose high penalties on such banks and on wrongdoers.
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Sep 17, 2022 12:49pm
Pakistani banking is 20 years behind as compared to USA and European banking. Nobody use and take cash out within country or when going abroad.
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Sep 17, 2022 12:52pm
Banks are doing their work perfectly....it is better to buy product from alibaba or amazon through your debit card instead of hundii..as banks have record of each transaction..
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Sep 17, 2022 12:54pm
Once upon a time, we had ample Foreign Exchange Reserves. We did not obtain any IMF loans, USAID help or other hand outs. The Exchange Rate was stable, as Rs. 60 / US$ 1. Exporting US Dollars for Credit Card payments or other purposes was not a problem at all. Then came Democracy in 2008 & the Economy declined at a very rapid speed.
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Sep 17, 2022 12:57pm
Only allow prepaid card holders and flag all non personal transactions .
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Sep 17, 2022 12:59pm
@Salman, Banks are not at fault. It's the democratically elected politicians who have been stealing money for the last 13 years, some in broad daylight, but the population is blind & they still cant recognize the theft.
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Sep 17, 2022 01:01pm
It seems the BANKS are also plundering the country but our media cant dare name them. The media only criticize government whose hands tied by previous regime through IMF deal
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Sep 17, 2022 01:04pm
Let them charge but charge high exchange rates
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Sep 17, 2022 01:20pm
Money laundering by the looters in charge who see their future abroad.
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Sep 17, 2022 01:46pm
Im not clear how banks are buying $ from credit cards.
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Sep 17, 2022 01:49pm
No doubt, banks, financial institutions and the lending companies are equally responsible for the unprecedented and unwarranted rising U.S. dollar value against the Pak Rupee in the Islamic Republic of Pakistan.
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Sep 17, 2022 02:06pm
Easy way to spend your money before the rupee sinks even further.
But if you use the card overseas or for online purchases in a foreign currency, the transaction fees and high conversion rate will almost make you pay Rupees 250 or more per dollar.
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Sep 17, 2022 02:15pm
@joe, It's not rocket science!
If you use a Pakistani bank's credit card online to purchase anything in USD or even outside the country, the bank has to settle that bill by buying the dollars and pay the vendor in USD. Because no one accepts a transsaciton in PKR.
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Sep 17, 2022 02:48pm
@Ashley, Yes, only if they stay at 5-Star hotels and use limousine service!
$10k will not cover expenses for 2 weeks in Dubai??
Average person in the US does not even earn $10k a month. How do they survive???
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Sep 17, 2022 03:39pm
I have no money
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Sep 17, 2022 03:40pm
@ABE, So what? We have money to spend more and more and can easily pay extra charges
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Sep 17, 2022 04:06pm
Ban the cards to impose sanctions on looters
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Sep 17, 2022 05:19pm
@Shahid, if tax paid on it, then it’s fine. If someone has paid required tax on day income of 15-25 million rupees he can spend all of it on credit card. Fbr can’t do anything
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Sep 17, 2022 05:34pm
US 10k is a modest sum if one travels to western countries.
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Sep 17, 2022 08:06pm
@Ashley, I'm not sure how you arrive at that. It means about $250,000 per year. At least in the US the average salary is about $54,000 per year. I agree that in larger, metropolitan areas it will be higher, but not $250k.
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Sep 17, 2022 08:12pm
Only IK can sort this mess that pdm and their useless backers have created, while there is time,dont delay, go for elections so IK can come in quickly.
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Sep 17, 2022 08:45pm
@Asad, This is what Dr. Ashfaque Hasan advised to IK but his advice fell on deaf ears as the elites are hooked to luxury.
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Sep 18, 2022 07:49am
@Ashley, that's 714 bucks a day. Comfortably 300 can suffice if you stay in the middle. Living big can cost you anything for the day.
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Sep 18, 2022 07:59am
The banks are just jacking up the conversion rate. If I have money in the bank and I pay all my taxes and I want to transfer my funds via credit card or on a vacation swipe my card for any amount of dollars, charge me all the fees and taxes or what not, what's the problem with that.
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Sep 18, 2022 04:58pm
These manipulations will stop only when the rupee finds it real market value which is hovering around 270.
Therefore when the rupee slides to reach 270, making noise will not help. Further, if Federal Reserve increases the interest rate on Wednesday, rupee will slide faster and the real value will hover round 285.
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Sep 18, 2022 05:03pm
@Ashley,
Too ambitious. In NY city, a family of three can easily survive with a monthly (repeat monthly) income of $3500
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Sep 18, 2022 05:07pm
@Salman,
No administration can control the present economic woes. Indication is that people should tighten belts. No other alternative. Massive devaluation is therefore the only solution. Prices will increase and imports will be restricted
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Sep 18, 2022 05:10pm
@Humza,
Sporadic interference by SBP is the problem. Rupee should be totally floated without any interference from any quarter. Let market forces find its real value.
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Sep 18, 2022 08:34pm
@Asad, Choice shouldn't ever be a luxury.
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Sep 18, 2022 09:35pm
@Ashley, Really so you are saying avg monthly expense is $20000 per month for a family of 3....interesting a family of 3 with a 2bedroom spacious apt in a City like say Chicago, Dallas or Florida can easily live on a $4000 per month that includes trans food shelter clothing, sure one can spend 20 k as well but that's not reality
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Sep 18, 2022 10:47pm
Use of CreditCards in Pakistan be restrcted for Pakistan currency only.. Every little helps
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Sep 18, 2022 11:43pm
@Asad, Japan's yen is going down the toilet despite their higher export of cars and other goods to the rest of the world. It's not as easy as you think that import ban will appreciate rupee value. The main reason is that US govt has increased it's interest rates and many people are moving their assets to US banks that is causing devaluation of other currencies.
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