Lucrative grey market for dollars threatens remittances

KARACHI: The dollar has disappeared from the open market run by the exchange companies and there are reports that the US currency is trading at a much higher price in a parallel grey market.

“This is true. The dollar is not available in the open market, but the grey market is offering it for as high as Rs232, making the legal currency business meaningless,” said Zafar Paracha, the secretary general of the Exchange Companies Asso­cia­tion of Pakistan.

On Tuesday, the dollar was changing hands at Rs223.50 in the open market. In the interbank market, it continued to gain strength for the fifth straight day and closed at 219.71 to the rupee, up 0.37 per cent.

The widening gap between the open and interbank markets has also threatened remittances sent through banks by Pakistanis working abroad. The inflows already fell by $300 million month-on-month to $2.4 billion in September.

The central bank tightened rules for currency business in the open market to control the outflows and keep the prices within a certain range to keep the exchange rate stable. However, a grey market has now emerged, which is growing stronger with the shortage of dollars in the open market.

“We should not ignore Afghanistan’s role in this grey market. The Afghan government has given one month to their people to convert all their Pakistani rupee holdings into any currency,” Mr Paracha said.

He said the dollar was even selling for as high as Rs236 in Peshawar, mostly bought by Afghan citizens as the US currency was trading at Rs238 in Kabul.