Pak currency exchange firms offer help as banks back off amid economic crisis
Jan 08, 2023
Islamabad [Pakistan], January 8 : Amid depleting foreign reserves, currency exchange firms of Pakistan on Saturday offered to pay for resuming the letter of credit facility (LC) for supporting imports as banks step back due to Pakistan's ongoing economic crisis, according to a Geo News report.
General Secretary Exchange Companies Association, M Zafar Paracha, said in a statement that numerous sectors and industries are facing issues due to banks' refusal to open letters of credit.
He also mentioned that they would offer the financing at Rs 255 per dollar compared to Rs 227 per dollar in the interbank market. The Khaama Press report further mentions that the exchange rate in black market is although over Rs 270 per dollar.
These exchange firms have offered their assistance to the government by providing the needed US dollars, just as these firms do for credit card settlement, education purposes and medical treatments abroad, as well as Hajj, Umrah, religious pilgrimages, and other travels, he added.
According to the Geo News report, this comes at a time when importers face a crisis as their LC gets denied or due to non-clearance of their consignments left at the docks for weeks. It causes them increased dock and demurrage charges on their imports increasing their troubles.
The Geo News report also quotes Paracha saying that the suggestion has already been delivered to Finance Minister Ishaq Dar. The currency dealers' proposals come as the country toils with diminishing foreign exchange reserves. According to SBP data, the central bank's foreign reserves fell by USD 245 million to USD 5.6 billion as of December 30.
This comes at a time when amid a severe economic crunch, foreign exchange reserves held by the State Bank of Pakistan (SBP) were reduced to just USD 4.5 billion and left with an import cover of only under a month. The slump comes after the repayment of loans worth USD 1.2 billion to United Arab Emirates (UAE) banks.
According to sources, the development left Pakistan with an import cover of only under a month, as the country grapples with a deteriorating economic crisis while trying to bring down imports amid a dollar shortage.
A breakup shows that Pakistan returned USD 600 million to Emirates Bank, while it repaid USD 420 million to Dubai Islamic Bank.
