SBP expands scope of investigation into alleged exchange-rate manipulation

KARACHI: Pakistan’s central bank has expanded its scope of investigation into alleged exchange-rate manipulation beyond eight banks with the inspection team working towards the end of the month as its deadline, said State Bank of Pakistan (SBP) Governor Jameel Ahmad on Monday.

“Our inspection team is working on this (investigation against banks for manipulating exchange rates) and we have given it the end of the month as the deadline,” Ahmad said while talking to reporters after the inauguration of the Institute of Business Administration (IBA), Karachi’s Finance Lab at the School of Business Studies (SBS), an event where he was the chief guest.

Last month, the SBP had said it will soon complete an investigation into alleged manipulation by commercial banks of foreign exchange operations in the country.

The investigation came after Pakistan's rupee fluctuated wildly this year, particularly recently, hitting record lows against the US dollar in September before suddenly rising towards the end of that month, leading authorities to suspect manipulation by banks and exchange companies.

In recent weeks, the rupee has remained largely stable in the inter-bank market.

In October, SBP chief spokesperson Abid Qamar had said results might come soon, but refrained from giving an exact date for the completion. However, he said that the probe had started some time back during the tenure of the previous finance minister, Dr Miftah Ismail.

On Monday, SBP chief Ahmad, who was appointed in August, said regulatory action will be taken after the investigation is complete.

Ahmad refrained from taking names, but clarified the scope of the investigation had expanded after initial scrutiny.

“We are focusing on banks that were active in foreign exchange (trading), based on volume of the business.”

Meanwhile, the governor said pending Letters of Credit (LC) of up to $100,000 will be cleared by this week.

“Moreover, businesses that have projects near completion have also been facilitated."

Ahmad also placed confidence over the country’s foreign exchange reserves that have fallen $956 million on a weekly basis, clocking in $7.96 billion as of November 4, 2022, according to latest data.

“We have over $7.9 billion reserves. These are more than sufficient to meet any obligations.”

Finance minister Ishaq Dar, who replaced Miftah as finance minister at the end of September and is widely seen as an advocate of a strong rupee, had last month said that the country’s currency will strengthen. The rupee was hovering around the 235-236 level in the inter-bank market when he took office. It is currently trading in the range of 221-222.

Dar at the time also warned of strict action against institutions found involved in unlawful practices, and asked banks and exchange companies to avoid manipulation of the dollar.