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Rupee’s recent decline against dollar blamed on ‘manipulation’ by certain banks

Published

11 months ago

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  • Market sources say no shortage of dollars due to good inflows. 
  • Commercial banks working like a cartel, reveal intel sources.
  • Say banks jack up inter-bank dollar rate to maximise profits.

ISLAMABAD: The recent two-day decline in the price of rupee against the dollar, which has now reversed, was allegedly due to manipulation by certain banks, reported The News on Friday.

On Thursday, the rupee turned the tide against the dollar and strengthened in inter-bank and open markets simultaneously with clear-cut margins but there was no apparent change in the fundamentals of market forces.

The reversal shows that the decline in the rupee’s value was due to the connivance of certain commercial banks that were instrumental in manipulating the currency market to maximise their benefits and profiteering.

In the past, the banking sector’s profits ballooned without any repercussions or being burdened with windfall gains tax after they managed to foil all such attempts made by the authorities.

However, intelligence sources told The News that the commercial banks, along with other stakeholders, were working like a cartel. They added that the banks jack up the inter-bank dollar rate to maximise their profits on lined-up Letter of Credits (LCs) of importers and deliberately delay LCs to create an artificial shortage of greenback in the market and raising the interbank dollar rate to Rs282.

Following a hue and cry by importers and other stakeholders, the banks blamed the upcoming payment of installment to the International Monetary Fund (IMF) by the government in November for the dollar’s increase.

But market sources told The News that there was no shortage of dollars in the market as money changers are getting good inflows.

Therefore, the banks accumulated USD at 276/277 and then raised the interbank rate to over 280 to earn profits. The market stakeholders claim that banks usually resort to these sorts of tactics to offset the losses incurred due to continued depreciation in the price of dollars.

Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan, when questioned about the issue, laid the blame on the manipulation under which efforts were made to convert all benefits into losses by creating a new wave of the weakness of the rupee against the dollar and it was conveyed to high-ups.

Bostan said that the rupee recovered on Thursday and is hopeful of seeing the trend continue in the coming days as well.

Zafar Paracha, ECAP ‘s general secretary, agreed with Bostan’s assessment of alleged manipulation by banks. He added that proper actions taken by the relevant authorities led to the improvement of rupee-dollar parity in both interbank and open markets.

Meanwhile, independent economists argue the government took administrative steps in the right direction, which yielded positive results. However, they warned that the sustainability of those gains is dependent on the economic managers’ ability to generate dollar inflows to get Pakistan out of the dollar liquidity crunch.

Pakistan, they said, would have to repay around $790 million as debt servicing of foreign loans, including principal and mark-up repayments. Out of this, the government had repaid the Euro bond interest repayment in recent weeks.

Now the government is also bound to repay $187 million as principal and markup amount in the current month, so the dollar inflows need to be improved in order to stabilise the currency market on a sustained basis.

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It is anticipated that 150 ships would arrive at Gwadar by the year 2045, allowing the port to handle fifty percent of all imports.

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3 days ago

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In an effort to strengthen the port’s economic importance, the Federal Government has made the decision to direct fifty percent of all imports from the public sector to Gwadar Port.

By taking this action, which has the backing of the Special Investment Facilitation Council, the port’s financial situation is going to be improved.

The Cabinet will be presented with a summary of imports through Gwadar by the Ministry of Maritime Affairs, which will take place after Prime Minister Shehbaz Sharif’s recent trip to China.

When the next Cabinet Meeting takes place, Ahsan Iqbal, the Federal Minister for Planning, Development, and Special Initiatives, will examine the Chinese offer for the Karachi to Hyderabad Section of the ML-1 Project and bring it to the Cabinet.

Company preparations for the Shanghai International Import Expo, which will take place in November 2024, are being made by the Board of Investment and the Ministry of Commerce of Pakistan.

One of the most important aspects of the China-Pakistan Economic Corridor is the Gwadar port, which serves as a significant commerce route connecting China, the Middle East, Africa, and Europe. At this time, the Gwadar Port is able to accommodate two huge ships, and by the year 2045, it is anticipated that it would be able to handle up to 150 ships.

By developing the Gwadar Port, regional connectivity would be improved, employment will be created, and international investment will be attracted.

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The price of gold in Pakistan has experienced a significant surge.

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3 days ago

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Gold prices in Pakistan surged significantly on Thursday following two consecutive days of decline, with the price per tola rising by Rs2,000 to reach Rs262,100. This increase was in accordance with the downward trend in international market values.

The All-Pakistan Gems and Jewellers Sarafa Association (APGJSA) reported that the price of 10 grams of 24-karat gold rose by Rs1,714, reaching Rs224,708.

Conversely, the world gold market experienced an upward trajectory. According to the APGJSA, the global price of gold surged to $2,503 per ounce following a $22 gain during the trading session.

The local market experienced a significant decline in silver prices, decreasing from Rs50 to Rs2,900 per tola after a prolonged period.

The local market’s gold prices remain subject to the ever-changing dynamics of the international market, as well as domestic considerations such as currency exchange rates and domestic demand.

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The government has not met the deadline set by the International Monetary Fund (IMF) for the approval of a $7 billion loan.

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4 days ago

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On Tuesday night, there were virtual talks between representatives of the Finance Ministry and the IMF delegation, with the main topics being external finance and income generation.

According to people familiar with the situation, no date has been set for the IMF’s Executive Board to approve the loan despite the ongoing negotiations.

Officials from the Finance Ministry informed the IMF mission about the government’s initiatives to get outside funding during the discussions. Updates on loan rollovers and fresh finance commitments from allies were included in this. According to sources, the IMF has received a schedule, and loan rollovers are expected to be finished by the end of next week.

The $12 billion in debt must be rolled over before the loan can be approved by the Executive Board, according to the IMF mission.

In the virtual discussions, representatives of the Federal Board of Revenue (FBR) conversed with the IMF team over the revenue deficit. The FBR must reach its revenue goals for this month, according to the IMF mission. As a result, the IMF has asked the FBR to submit a thorough strategy outlining how it will close the gap left by the shortfall and guarantee that revenue goals are reached.

Apart from the conversations on outside funding, there are rumors that the Finance Ministry is actively holding talks with commercial banks in order to obtain new funding. According to reports, negotiations are taking place with four distinct sources for commercial loans, which are anticipated to support the government’s overall financial plan.

Finance Minister Muhammad Aurangzeb disclosed on Tuesday that the IMF was in favor of introducing targeted subsidies. He said that qualifying recipients might receive these subsidies through the Benazir Income Support Programme (BISP).

In order to guarantee consistency, the minister announced that this week’s talks with chief ministers will focus on implementing a similar policy across the country. He was having a casual conversation in parliament with the journalists.

In response to queries about outside funding, Aurangzeb revealed a $2 billion deficit and said that talks to close this gap are progressing. He stressed how crucial it is to obtain business loans.

He went on, “At this point, there’s a need to secure an agreement for commercial loans, not exactly their issuance,” emphasizing that debt rollover negotiations are nearing their conclusion and doing well. The minister expected that these developments would shortly be reported to the governments of allied countries by relevant authorities.

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