KARACHI: The dollar appreciated by Rs1.18 against the rupee in the inter-bank market on Tuesday. The greenback was being traded at 231 in the early morning trade.

This is the eighth consecutive increase in the dollar value. On Monday, it was closed at Rs229.82 after gaining Rs1.64 in value, the State Bank of Pakistan reported.

The PTI has been criticising the coalition government over consecutive increases in the dollar value and expressed concerns over the economic policies. But, Finance Minister Miftah Ismail, who has accused the PTI of laying “landmines” in form of fuel subsidies, said that such gains against the local currency were because of the rising greenback demand for import payments.

The dollar was extending gains against the local currency due to the rising greenback demand for import payments, Finance Minister Miftah Ismail told Aaj News on Monday.

“Recent floods have caused around $18 billion worth of losses to Pakistan,” he said while speaking exclusively on the programme ‘Faisla Aap Ka’. Miftah was of the view that it was the “worst challenge” Pakistan’s economy was facing.

The finance czar said that the market was expecting the export of wheat and cotton which, he said, was the reason behind the depreciation of the local currency against the dollar.

Why dollar is increasing this time?

The surge in the dollar value was because of greenback smuggling, uncertainty in the country and strict laws for exchange companies, Zafar Paracha, the general secretary of Exchange Companies Association of Pakistan (ECAP), said.

“Firstly, it has been seen that the smuggling of the dollar was on the rise, especially in Afghanistan and Iran,” he told Aaj News on September 9. The ECAP general secretary had joined the channel to speak about the currency rate and its reasons.

The dollar has gained Rs12.4 against the rupee since September 1 despite receiving over a $1 billion tranche from the International Monetary Fund. Many people were of the view that the inflow from the global lender would improve market sentiment and the greenback would fall by Rs10 to Rs15. But, the August 1 development only led to an Rs2 decrease.

“Secondly, the uncertainty in the country has led to the flight of capital and there was a demand of Hawala and Hundi,” Paracha said while speaking about the political situation.

He was of the view that the government has made strict laws for exchange companies and people for selling and buying dollars. “This has converted our formal market into the grey market and it has increased rapidly.”

The dollar was being traded at Rs240 in the grey market, Paracha added.

Previously, the interbank was less than the open market, however, there was now a difference of Rs10-12 between the two markets. “It has never been in history.”

The ECAP general secretary did not dispel the slight impression that some money changers might be involved in Hawala and Hundi. But, he rejected the thought that some might be involved in sattay bazi (illegal trade of dollars) as the market was very small. Paracha blamed illegal chains for the rupee’s massive depreciation.

He claimed that banks have made such speculations. “Open market follow inter-bank. We follow the trade. It’s like the government increases fuel rate and the petrol pumps act upon it.”

“We are empty. We don’t have dollars as soon as the dollar comes to us the rate will decrease,” Paracha said, “we need $40 billion this year. If we receive $8 to $10 billion dollars, then the market will come Rs10 to 15 down and its level should be Rs200.

For the last 15 to 20 days, the exchange companies have not given dollars to inter-banks. It would be able to deliver some when the rates of both markets are the same. Earlier, they used to give $25 to $30 million on a daily basis to the inter-bank.

Such a situation also impacts exchange companies. Paracha hoped inflows from other sources would improve the market.