(Bloomberg) – Pakistan’s central bank is discouraging interbank trading due to a severe shortage of dollars that pushed the rupee to post its worst weekly decline since 1998, according to people with knowledge of the matter.
The State Bank of Pakistan has instructed commercial lenders to handle import payment claims from their own entries, such as accrued charges and remittances from exporters, the people said, asking not to be identified in private discussions. If the bank still needs to borrow, it must seek permission from the monetary authority, the sources added.
The State Bank of Pakistan did not respond to an email seeking comment.
The rupee fell about 8% last week, its biggest drop in more than two decades, as Pakistan’s foreign exchange reserves are sufficient to cover less than two months of imports. Despite this, acting SBP Governor Murtaza Syed told Bloomberg that the country would comfortably meet its financing needs with an International Monetary Fund bailout on track.
Pakistan says concerns are ‘overblown’ as rupiah falls the most since 1998
Some banks seek permission from the SBP and provide dollars at a higher price, increasing costs for their customers, according to others with knowledge of the matter. Banks provided energy companies with dollars at rates of 238 rupees and 242 rupees to the dollar on July 20, about 8% higher than the official closing rate for the day, the sources said. The news magazine Profit first reported on the more expensive payments.
Banks that used to make overseas payments within a day are now taking more than a week, said Raheel Ahmed, managing director of VN Lakhani and Co., a Karachi-based steel importer.
Pakistan has come under pressure on dollar payments due to energy payments, Finance Minister Miftah Ismail said at a news conference July 21 in Islamabad. The trend will reverse, with the supply of dollars outstripping the demand next month, Ismail said.
©2022 Bloomberg LP