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Exchange companies will lift the dollar rate cap from tomorrow.

Exchange companies will lift the dollar rate cap from tomorrow.

The Exchange Companies Association of Pakistan (ECAP) stated on Tuesday that the US dollar cap would be lifted from January 25. (tomorrow). The sharp reduction in the central bank’s foreign exchange reserves, which have dropped to $4.6 billion, has had a significant negative impact on the exchange rate. The rupee has been declining “despite being handled,” according to currency analysts, by the State Bank of Pakistan (SBP).

Due to a lack of dollars, the difference in rates between the interbank and open markets has grown dramatically, severely harming the economy and directing remittances away from the official banking system and onto the black market.

The trade and industry, as well as the agricultural sector, which depends on fuel during the harvesting season, may be negatively impacted by the rationing of gasoline and diesel in the coming two to three months due to the lack of dollars.

Tuesday saw an association meeting that was presided over by ECAP Chairman Malik Bostan and General Secretary Zafar Paracha. Bostan claimed that the decision to cap the dollar rate had turned out to be “negative” in a thorough statement released following the meeting.

“Instead of declining, the dollar rate grew, leading to a shortage of dollars on the market and the emergence of the illicit market.” He also bemoaned the fact that people had to turn to the illicit market in order to purchase dollars for travel or to pay for their medical and educational costs.

The government, he claimed, believed exchange businesses were “deliberately blackmailing” them as a result of the scenario’s “fear in the market,” which had caused the crisis.  “We made a decision with these factors in mind.” He added that the organisation and the central bank would meet tomorrow at 9 a.m.

Bostan stated, “Since the governor is in Islamabad, we have a meeting with the SBP deputy governor tomorrow morning. We’ll trust them with the choice since “the cap imposed in the national interest has shown to be harmful.”

He continued, “Once the black market shuts down, the dollar rate will start to fall. I want to inform the public that the shortage is being brought on by exchange companies’ inability to obtain dollars from anywhere.

Bostan added that importers were receiving the dollars obtained through employee remittances in accordance with instructions from the central bank. The central bank had assumed that people would sell their dollars to exchange firms, he said, but this had also shown out to be false as people were coming to buy dollars instead.

The ECAP chairman made a statement in response to the SBP’s instruction for banks to “give one-time assistance” to importers in an effort to ease the ongoing crisis, claiming that this had also caused “panic” in the market and raised the rate in the black market.

He claimed that it was necessary to suppress the black market. He claimed that lifting the dollar rate cap is the only way to do this. The ECAP chairman asserted that “when consumers can buy dollars readily, the rate of the greenback will immediately start to decline.” When the intermarket and pre-market rates are equal, remittances will likewise rise.

Bostan urged the country to “boycott the dollar” at the same time. “Pakistan is in a crisis and needs every single dollar available. Except for individuals who use dollars to pay for important trips or to pay for their education and healthcare, they should reject the dollar.