Dr. Saeed Ahmad Ali
LAHORE, Oct 01 (APP):Experts said on Sunday that due to the strict measures of the government for curbing the smuggling and hoarding of US dollar, Pakistani rupee claimed the title of the world’s best-performing currency, marking a seven-week high against the US dollar.
According to the State Bank of Pakistan’s data, on the seventeenth successive working day of its upward trajectory, the rupee closed at an impressive Rs 287.74 against the greenback, gaining 0.35 per cent or Rs 1.01.
Likewise, amidst a determined crackdown on smuggling and illegal financial activities, the Pakistani rupee has emerged as the world’s top-performing currency for September, 2023, they said.
During this remarkable month, the rupee’s value surged from Rs 305.54 against the US dollar on August 31 to Rs 287.74 on the end of September, with a notable increase of Rs 17.8 or 6.2 per cent. As Pak rupee has become the best-performing currency of the world during September 2023, in the same period, other top-performing currencies such as the Hong Kong dollar, Mauritian rupee and Canadian dollar gained less than 1 per cent. In contrast to this data, over three dozen currencies globally experienced declines ranging from 0.1 per cent to 6.2 per cent during the month, leading financial firm Arif Habib Limited sources told APP.
It’s essential to note that the currency markets were closed on Friday, September 29 due to Eid Milad-un-Nabi.
Additionally, during the same month, the State Bank of Pakistan (SBP) introduced structural reforms by targeting the Exchange Companies (ECs) sector.
These reforms included a directive for commercial banks to establish their own ECs as completely-owned subsidiaries and an increase in the minimum capital requirement for ECs from Rs 200 million to Rs 500 million. Pakistan’s rupee is set to become the top performer globally this month as the incumbent interim government continues crackdown on the illegal dollar trade helped reverse its fortunes.
As per Bloomberg report, during the month of September, the rupee surged almost 6 per cent, a remarkable feat as most currencies including the Thai baht and South Korean won tumbled against the dollar on speculation US interest-rates will stay elevated for longer. The currency rose 0.1 per cent to 287.95 per dollar on last Thursday, after sliding to a record-low of about 307 in September, 2023.
“Many leakages were happening through illegal channels of hawala and hundi trade from the open market,” Khurram Shehzad, Chief Executive Officer of Alpha Beta Core Solutions Pvt. Ltd, a financial consultancy in Karachi, said in a statement. Hawala and hundi are an informal system of fund transfer common in South Asia, it added.
“When the USD rate reverses, everybody, the hoarders, the exporters who are holding their export proceeds, start selling their dollars,” Shehzad said.
According to the report, the Pakistani government intensified measures by running after people involved in the illegal dollar trade that helped the currency.
The central bank also raised the capital requirements of smaller exchange companies and ordered large banks to open their own exchange companies to make the retail foreign-exchange market more transparent and easier to monitor.
Zafar Sultan Paracha, General Secretary of the Exchange Companies Association of Pakistan, told APP the rupee improved by almost 6 per cent in September, which is higher than any other currency around the world.
He said the country’s dwindling inflows have significantly improved in recent weeks following an army-backed crackdown on widespread smuggling and hoarding of dollars.
Security forces have fully extended their cooperation, adding they arrested several money exchange dealers from across the country for their alleged involvement in illegal outflows of greenbacks. “Strict measures to curb the illegal outflows, have practically dismantled the gray (currency) market, pushing the speculators to go underground and streamlining the inflows and outflows of the dollar,” he said.
Paracha said a gradual plugging of a huge gap of Rs 30 in interbank and open market rates, has prompted overseas Pakistanis to use banking and other legal channels to transfer dollars to the country.
Several exporters, who had stopped payments due to a big gap in interbank and open market rates, have also started releasing amounts, he added.
It should be noted that this trend would continue to persist in the coming days due to increasing supplies and decreasing demands (of dollars),” he added.
Muhammad Suhail, a noted economist observed that the winning streak of the rupee will depend on future economic fundamentals. “In the short run, we may see the PKR strengthen due to ongoing measures taken by the regulators for compliance with laws,” Suhail told APP.
However, in the medium term, he said it all depends on economic fundamentals, especially Forex reserves and the International Monetary Fund’s (IMF) Loan Review in November.
Likewise, the dollar crossed a record Rs 300 mark in August, 2023 in the interbank, and Rs 335 in open market, forcing the caretaker government to increase petroleum and power prices, he informed.