The dollar shortage in Pakistan seems to be worsening as traders reported that they were having difficulty in opening letters of credit.

Money exchangers say that the dollar shortage is caused by hoarding and that there is agap between the official dollar rate and the actual market price of the dollar.

Zafar Piracha, secretary general of the exchange companies association, said that the dollar is selling at a higher rate in the gray market. This has diverted attention from investors.

He also said that banks dollar reserves in banks are dangerously low, but there is no shortage in the open market. The reason for dollars not being readily available in the open market is because the official rate is Rs. 234. However, the rate in gray market has exceeded Rs. 255.

The dip in dollar availability comes as the government tries to grapple with a tough economic outlook and dwindling foreign exchange reserves. Finance Minister Ishaq Dar has maintained that there is no risk of default but money from IMF or friendly countries has not materialised.

The FM also chaired a meeting of senior ministers in Islamabad on December 9 where participants agreed that dollar smuggling needed to be curbed.

It was also revealed recently that many of Pakistan’s foreign missions had not been paid salaries for four months due to a shortage of foreign exchange. However, the finance ministry said on December 14 that the funds have now been released, according to reports.