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

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1 year 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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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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2 days ago

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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3 days ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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