The State Bank of Pakistan (SBP) has allowed authorised dealers of foreign exchange to purchase the US dollar from the inter-bank market for settlement of card-based cross-border transactions with international payment schemes such as Visa, MasterCard.

A notice, confirmed by the central bank, was issued on Wednesday to all presidents/chief executives of all authorised dealers in foreign exchange. It said the instructions are applicable with immediate effect till July 31, 2023, unless otherwise notified.

The move, which reduces demand-side pressure on exchange companies, is aimed at facilitating customers get a lower rate on the US dollar that has seen a widening gap between the inter-bank and open-markets.

On Wednesday, the rupee closed at 285.47 against the US dollar, a decline of Re0.12, as per the SBP. However, in the open market, the rupee was hovering between 311 to 315.

Zafar Paracha, general secretary at the Exchange Companies Association of Pakistan (ECAP), welcomed the circular.

“In my opinion, the SBP took the right decision at the right time. It is likely to bring down the open market’s USD rate, and reduce the gap between the two markets.”

Prior to the notice, customers were charged the open-market IUSD rate on their credit and debit card cross-border transactions. Recently, while the rupee remained largely around the 285-286 level in the inter-bank market, its value in the open market plummeted to around 315.

Market talk suggests the volume of transactions is such that it will reduce pressure in the open market, but will not cause a significant disruption in inter-bank market volume.