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Forex firms advise govt to fix higher dollar rate to boost remittances

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  • ECAP believes the move will place curbs on illegal channels. 
  • Says it will eventually eliminate the prevailing grey market.
  • Rupee in the grey market has reached 267/270 against the dollar.

KARACHI: The Exchange Companies Association of Pakistan (ECAP) has advised the government to “fix” the dollar rate to reduce the volatility in the currency market as the country grapples with a severe economic crisis amid depleting forex reserves, reported The News.

“It is advised to fix the rupee/dollar exchange rate for export-import bills and remittances,” said Zafar Paracha, the general secretary of ECAP in a statement on Monday. These remittance proceeds could be brought in by banks and money changers at a fixed rate of 240 per dollar, he added.

The local currency ended at 228.34 per dollar, compared with the previous close of 228.15 in the interbank market. In the open market, the rupee was trading at 238.75 against the dollar. It was available at 238.50 on Friday.

Paracha suggested to the government to offer a rate of Rs240 per dollar to overseas Pakistanis and for inward remittance. He believes the move would help increase remittances, reduce Hundi/Hawala, strengthen the official channel, and eventually eliminate the grey market.

The rate of the dollar in the grey market has reached 267/270 versus the local unit, according to Paracha. For the purpose of getting the exporters’ proceeds, the offer could be made at 228 rupees to the dollar. And the rate for importers would be based on the weighted average of home remittance and exporter rates. It would benefit exporters and remittances, he explained.

“It will encourage exporters to bring dollars into the country, enhance the foreign exchange reserve, and strengthen the remittances segment of the exchange firms.”

Remittances from Pakistanis working abroad dropped 19% to $2.0 billion in December. 

During the first six months (July-December) of the current fiscal year, the nation received $14.1 billion in remittances, which is a decrease of 11.1% from a year earlier.

Pakistan’s forex reserves held with the State Bank of Pakistan dropped by $1.2 billion to $4.3 billion as of January 6 — enough to cover barely three weeks’ worth of imports.

The country is currently experiencing a balance of payments crisis due to large foreign debt repayments and a lack of external finance, which have severely depleted Pakistan’s foreign reserves and led to persistent dollar shortages.

The government has restricted several imports to save dollars, and some businesses have shut down as a result of being unable to import machinery or parts.

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The gold price in Pakistan today

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According to the All Sindh Sarafa Jewellers Association, the price of 10 grammes of 24 karat gold increased by Rs772 to Rs184,928 from Rs184,156, while the price of 10 grammes of 22 carat gold increased to Rs169,517 from Rs168,810.

These oscillations are strongly correlated with shifts in the US dollar’s value, demonstrating the complex interplay between gold prices and exchange rates.

This emphasises how local gold prices are impacted by events related to the global economy.

On the other hand, the cost of 24-karat silver was constant at Rs 2,570. Globally, too, the price of gold increased somewhat by $9 to $2,057 per ounce.

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Pakistan receives a $2 billion loan from China, according to the finance minister

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The $2 billion loan was one year ahead of schedule and became due in March. According to reports, Beijing had informed Islamabad of the decision.

The International Monetary Fund granted Pakistan’s cash-strapped economy a $3 billion standby arrangement last summer, but the country is still battling to recover from the financial crisis.

According to ratings firm Fitch, one of the top concerns confronting the next administration would be obtaining funding from bilateral and multilateral partners due to Pakistan’s precarious foreign situation, as was stated last week.

This event occurs one month after Anwaar-ul-Haq Kakar, the acting prime minister, asked for a $2 billion loan to be rolled over for a year in a letter to his Chinese counterpart.

In his letter, Kakar also expressed gratitude for China’s efforts to lessen Pakistan’s load

of foreign payments.

It is to be noted that Pakistan acquired safe deposits of $4 billion from China to address the balance of payments issue.

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“Ready to work with Pakistan’s new government,” the IMF said.

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In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

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