KARACHI – The State Bank of Pakistan’s (SBP) decision to bar exchangecompanies from ‘home delivery’ of dollars and other foreign currencies isinhibiting large investors from currency trading, forex traders said onSaturday.

It is now compulsory to buy and sell dollars at the counters of exchangecompanies only — a move which has led to surplus dollars and othercurrencies.

Currency dealers insist that the State Bank move has made the businessrisky for large investors.

For making the open market business more transparent, the SBP on July 26issued a circular with instructions not to move cash from one city toanother, and advised companies to open bank accounts for transfer of money.The step was taken after Pakistan was included in the grey-list by theFinancial Action Task Force (FATF).

“Large investors have left the open market free from their influence whichconverted the currency market dominated by sellers while buyers have beendeclining,” said Malik Bostan, President Forex Association of Pakistan.

Anwar Jamal of Glaxy Exchange said, “The new condition is a big hurdle forlarge investors as they don’t want to take risks to bring their cash at theexchange company and take back whatever they buy.”

“Market is surplus with high inflows of up to $15 million per day fromDubai while we have been depositing about $12m to $15m per day in banks,”said Secretary General Exchange Companies Association of Pakistan, ZafarParacha.

While sellers have increased as Eidul Azha nears, local buyers have alsoentered the market in large numbers, he said. “At least $20m are beingdeposited in the banks every day by people who buy dollars from open marketat Rs122, deposit it in their accounts and encash at inter-bank rate ofabout Rs124 per dollar,” said Paracha.

Seemingly the State Bank is satisfied with the situation as the open marketdollar rates are below inter-bank rate and there is no readjustment as permarket rate.

During FY18, the State Bank adjusted inter-bank dollar rates thrice in thewake of higher open market dollar rates.

However, the last adjustment of four per cent could not sustain and dollarprice in inter-bank market fell back at Rs124 from Rs128.5 and iscontinuing to fall slightly each day.

Currency dealers said cash transactions only through banks helped theexchange rate positively as open market trading goes through bankingrecords.

At first, the currency dealers were against the action taken by SBP on July26 which stopped cash movement from one city to another. Initially theysaid shortage of cash (local currency) drastically cut trading volume inthe open market and dollar rate started falling.

However, now they maintain that with the help of State Bank all commercialbanks are ready to open accounts for currency dealers. Earlier, opening acurrency account for small cities was difficult for currency dealers sothey used to transport cash in vans.