KARACHI: The rupee slid to another low against the dollar on Friday as economic managers failed to rein in the depreciation that’s destroying people’s purchasing power.

The State Bank of Pakistan (SBP) reported the closing price of the dollar was Rs276.58 versus Rs271.36 a day before, showing that the dollar appreciated by 1.89pc or Rs5.22.

However, exchange companies quoted the dollar price in the inter-bank market as Rs279 against Rs273.5 quoted a day earlier.

The rate in the open market was close to that in the grey market, which priced the dollar at Rs283 versus Rs275.50 a day ago. The dollar gained Rs7.50 in a day.

“Many reasons were behind the recent spike in the dollar price. The most important one is that importers are in panic and willing to buy dollars at any cost,” said Zafar Paracha, secretary general of the Exchange Companies Association of Pakistan (ECAP).

The State Bank of Pakistan (SBP) recently allowed importers to arrange dollars from their own sources. The open market is dry while Hundi and Hawala are thriving these days.

Importers are willing to pay any price for the greenback, says exchange firms’ representative

“The open market doesn’t have enough dollars to sell to importers while a restriction is also there. Buyers can buy a maximum of $10,000 from an exchange company but the required documentation is too painful,” said Mr Paracha.

Buyers have to prove that they need dollars because of a genuine reason. The Federal Investigation Agency is also looking into the dollar buying cases. Exchange companies said banks are not providing them with dollars even though the SBP had promised so.

Reserves of the SBP fell to a multi-year low of $3 billion as per the latest announcement. The trend shows that the decline will continue until inflows start materialising. The government’s financial team is engaged with the International Monetary Fund (IMF) to revive the stalled IMF programme of $7bn and unlock the inflows. The falling reserves of the SBP have made currency dealers nervous. “We have no idea at which point the slide of the dollar will stop,” said a currency dealer.

Most importers that are buying dollars need to get their already imported goods at port or they opened letters of credit much earlier when the exchange rate was around Rs200.

The business community through its chambers across the country has been issuing warnings about the devaluation making their cost of doing business too high to continue. Millions of people will lose their jobs as a result of a high dollar price and rising inflation, they said.

Published in Dawn, February 4th, 2023