KARACHI: Pakistan’s central bank on Wednesday announced new measures to check the outflow of foreign currency, particularly to Afghanistan, which has led to the continuing fall of the Pakistani rupee against the United States dollar in recent weeks.
The US dollar, which closed at Rs170.96 in the interbank market on Wednesday, hit a record high of Rs168.43 in August last year, before declining and reaching Rs151.83 on May 14, 2021. The greenback has since been rising.
Analysts say the Pakistani currency is under pressure due to an increasing import bill and the flow of dollars to Afghanistan.
The State Bank of Pakistan (SBP) has now introduced regulatory measures to enhance transparency in foreign currency transactions by exchange companies and curb undesirable outflows of foreign currency.
“Persons traveling to Afghanistan will be allowed to carry only USD1,000 per person per visit, with a maximum annual limit of USD6,000,” the central bank said in a statement.
“Exchange companies will be required to conduct biometric verification for all foreign currency sale transactions equivalent to USD500 and above, and outward remittances. This requirement will be applicable with effect from October 22, 2021.”
Additionally, the central bank announced that exchange companies would be required to “sell the cash foreign currency and make outward remittances equivalent to USD10,000 and above against receipt of funds through cheque or banking channels only.”
These regulatory measures will help to improve the documentation of the sale of foreign currency by exchange companies and place a check on their undesirable outflow, it added.
Pakistan’s central bank has largely stayed away from the currency market, insisting it wanted to adhere to a market-based exchange rate policy. Previously, the SBP used to sell dollars in the market to stabilize the rupee.
Due to the central bank following a flexible exchange rate, exchange rate parity continued to go in favor of the US currency due to higher demand.
