KARACHI – Pakistan’s central bank dismissed the reports claiming thatcapping the price of US dollar caused loss of $3 billion in remittances andexports.
The development comes as the Pakistani rupee plunged around 10 percentagainst USD last week, in a biggest one-day drop in over two decades asExchange Companies decided to remove the cap on the US dollar, in a bid toend the hike in artificial demand for the dollar in the market.
State Bank of Pakistan now cleared the air in a press release, callingreports incorrect, citing a number of factors. “Export of goods have beenfacing headwinds due to moderating demand in international markets as mostof our major trading partners are going through a period of monetarytightening,” the SBP said.
It added that the US Federal Funds rate has surged from 0.25 percent inMarch 2022 to 4.5 percent to date; suggesting a noticeable global monetarytightening.
The bank further maintained that inflation has been higher in the developedworld, eating into the purchasing power of consumers, and mentioned thatfactors like floods and ensuing supply disruptions have negatively impactedexports.
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“In this backdrop, linking the decline in exports to a relatively stableexchange rate is not appropriate,” it said.
The press release further mentioned that “workers’ remittances weregradually tapering off from an all-time high level of $3.1 billion achievedin April 2022 due to Eid-related flows.”
The decline in exports and remittances is a result of number of exogenousfactors and domestic reasons and it wouldn’t be appropriate to ascribe itto the exchange rate only, the State Bank justified.