Hoarding by exporters contributing to rupee's fall, dealers say

KARACHI: The local currency crossed the 200-per-dollar mark in the open market for the first time in Pakistan's history on Wednesday, but dealers insisted the rupee's weakest level is not due to demand-and-supply factors, but pressure through hoarding of dollars by exporters who foresee greater profits in the days to come.

Zafar Paracha, General Secretary at the Exchange Companies Association of Pakistan (ECAP), insisted there is an ample supply of dollars in the open market.

“There is no shortage of dollars in the open market, and dollars are available,” Paracha told Business Recorder.

Multiple dealers Business Recorder reached out to on Wednesday also said the dollar was available in the open market in the range of Rs199.5-201. The dealers' buying rate hovered around 198, they added.

Similarly, Malik Bostan, President Forex Association of Pakistan, said there is no demand for dollars in the open market, and its fall is mainly due to inter-bank dynamics. “Only people travelling abroad and Hajj applicants are purchasing dollars at the moment,” he said.

Bostan said 90% of the dollars in the open market are being sold to the inter-bank market, while only 10% are being purchased by the public.

“USD worth $500,000 was sold in the market in Karachi today (Wednesday), while $5 million was sold to the inter-bank market,” said Bostan.

Currency's collapse continues: Rupee closes at 198.39 in inter-bank market, crosses 200 in open

However, he said 50% of export proceeds remain non-surrendered, as exporters are hoarding the dollar to fetch higher exchange rates, forecasting that the rupee will lose more value in days to come.

Meanwhile, Paracha said a successful resumption of the International Monetary Fund (IMF) programme would bring a positive impact.

“Following its resumption, the rupee could recover to 180 in the span of a month,” said Paracha.

Pakistan authorities and the IMF have commenced talks in Doha today (Wednesday), for revival of the stalled $6 billion Extended Fund Facility (EFF) programme.

Its revival has been termed crucial for Pakistan's cash-strapped economy, which has seen its foreign exchange reserves plummet in recent weeks amid import payments and debt servicing.

Foreign exchange reserves held by the central bank decreased another $190 million to $10.31 billion last week, with the level staying at less than 1.5 months of import cover.