The dollar crushed the local currency on Monday as its price crossed Rs108 in the open market, shifting up to 70 per cent of the remittances business to the hawala system that offered Rs109 per dollar, currency dealers said.
Despite several meetings with currency dealers in the recent past, the central bank has yet to come up with a plan to stop the rupee from sinking further against the greenback.
“The dollar touched as high as Rs108.40 in the open market and could go further up since its supply has hit the bottom,” said Exchange Companies Association of Pakistan Secretary General Zafar Paracha.
Currency dealers said demand for the dollar is not high, but its shortage has pushed up the exchange rate. “The most serious (problem) is the shift of remittances towards hawala trading. I believe 70pc of inward remittances are being channelised through hawala,” Mr Paracha said, adding that registered dealers are losing business.
Dealers said the hawala business will hurt the inflow of remittances through the banking channel because the difference between open and interbank rates has crossed Rs4 per dollar. The dollar is available at Rs104.85-90 in the interbank market.
They said hawala traders are offering Rs109 a dollar, which has slashed the size of the legal business of currency dealers.
“The dollar has gained Rs2 per dollar against the local currency during the current month,” said currency dealer Anwar Jamal. The dollar was available at Rs106.20 at the beginning of November.
Dealers said the Indian move to ban Rs500 and Rs1,000 banknotes is also a reason for the short supply of the dollar and other currencies in Pakistan. They said illegal Indian money travelled to Dubai from where dollars and other currencies landed into India as white money.
“The dollar and other currencies, which would usually come into Pakistan, are now being sent to Afghanistan. From there, the Pakistani currency is sent to Pakistan for the payment against foreign currencies at a very high rate while foreign currencies are sent to India,” said Mr Paracha. The Pakistani rupee is easily available in Afghanistan, he added.
Dealers in Pakistan collected foreign currencies other than the dollar and exported the same to Dubai from where the dollar would be imported against these currencies. Now the business has come to a standstill.
Reports say dollars are being bought to buy gold from Dubai as the yellow metal is relatively cheaper there. The gold import jumped 29pc in October on a month-on-month basis. Dealers said the gold price per tola is cheaper by Rs1,200-1,500 in Dubai.