KARACHI: August 28, 2023: As the rupee continues to shed its value, the gap in its rate with US dollar in interbank and open market widens to Rs 13, 20. US dollar jumped up to Rs 301.80 and Rs 315.00 in open market on Monday. Rising gap in US dollar and the local currency in open market and interbank is violation of the International Monetary Fund (IMF) agreed signed by Shahbaz government. The Shahbaz government had agreed to IMF to retain gap between US dollar and the rupee in open market and interbank below Rs 3. However, in just couple of months since Shahbaz government’s agreement with IMF, the gap between the rupee and US dollar in interbank and open market grew 500 %. Pakistan’s violation of the agreement on exchange rate may offend the fund to ultimately stop the next tranche due by December this year.
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US dollar has appreciated by Rs 12 since August 1 in interbank and Rs 23 in open market. It’s the worst performance of the local currency against US dollar. The State Bank of Pakistan claimed the other day that removing of restrictions on imports is stoking US dollar price in the market.
The data released by All Pakistan Currency Dealers Association (APCDA) on Monday suggests US dollar reached to Rs 301.80 level in interbank. In open market, US currency jumped up to Rs 315.
It’s extremely important for the caretakers economic team to look some window to pull interest rate down from 22 percent to some reasonable level. The substantial reduction in interest rates will divert major portion of financing of the banks from lending to the government to real borrowers like agriculture, businesses and industrial sectors. High interest rate is hurting Pakistan like a double edge sword. On one hand, its making lending for the real sectors of the economy impossible as no business, trade or any industrial activity is possible in Pakistan as long as interest rate is there. Secondly, higher interest rate is giving unreasonable profit to the banks and the people are its major loser as money being doled out to the banks by the government against huge borrowing is draining down from the public paid taxes.
