KARACHI: The US dollar increased to Rs247 in the open market despite the Exchange Companies Association of Pakistan (Ecap) move to reverse its decision to remove the cap on the US dollar rate “for now”, sources told Aaj News on Wednesday.

This came after Ecap members had a meeting with the State Bank of Pakistan officials. However, the US currency did not fall and gained Rs2.30 rupees in the open market. It was being traded at Rs247, according to updates by 12:15pm.

The association decided to remove the cap on the dollar in its meeting on Tuesday in view of the “negative” impact of its earlier decision on the greenback, prompting fears that the value of the greenback would shoot to Rs255.

Sources added that the SBP has asked the banks to provide dollars to the exchange companies.

Earlier in the morning trade, the greenback gained three rupees against the local currency in the open market. It closed at Rs240.75 on Tuesday.

The US currency had marginal gains against the local currency in the early morning trade in the interbank market, being traded at Rs230.50.

Reuters adds: The Pakistani rupee fell by 1.2% on Wednesday after foreign exchange companies removed a cap on the currency, saying it was creating “artificial” distortions in the market as the South Asian country struggles to escape a deepening economic crisis.

The rupee was bid at 240.60 to the US dollar and offered at 243 in early trade, the Exchange Companies Association of Pakistan said in a statement, compared with a range of 237.75/240 at the close on Tuesday.

Pakistan’s rupee registered a marginal loss against the US dollar in the inter-bank market, depreciating 0.03% during the trading session, Business Recorder reported. At around 10:10am, the rupee was being quoted at 230.48 during intra-day trading, a depreciation of Re0.08.

The rupee has depreciated 11.23% against the greenback so far in the current fiscal year 2022-23, which ends on June 30.

The International Monetary Fund is yet to approve its ninth review to release $1.1 billion, which was originally due to be disbursed in November last year, but got held up over fiscal consolidation issues.

The IMF has called for fiscal steps to reduce the budget deficit that include subsidy cuts, slashing energy sector debt, levying more taxes to plug the revenue shortfall, and a market-based exchange rate as conditions for releasing the funding.

Prime Minister Shehbaz Sharif said on Tuesday that his country was willing to discuss all of the IMF’s demands.

‘Three rates of dollar’

“Until you bring your rates at real exchange effective rate, these issues related to the difference of rates in markets will never be resolved,” Zafar Paracha, the ECAP general secretary, said while appearing at the Aaj Exclusive show on Tuesday.

He claimed that the availablility of the dollar in country was “enough”, however, the problem pertained to the rates. “Until the rate is fixed… right now the rate is Rs228 and Rs230 and the actual rate at which we are supplying the dollar to banks was around Rs256 and Rs257,” he said and claimed that millions of dollars were given to the banks.

Paracha shared a suggestion which he put forward to Finance Minister Ishaq Dar. And this is keeping three different rates of the dollar: Rs230 for exporters, Rs242 for overseas Pakistanis and exchange companies, and Rs236 for importers. He was of the view that the Rs236 rate would not have any effect on the government exchequer.

He revealed that the government was taking the same steps that Sri Lanka took before going default. The inflation rate would reach to 75% if the country does not follow the International Monetary Fund’s conditions.

‘Crackdown’

“You will see that a crackdown will begin in the next two to three hours in the country,” Muzammil Aslam, former spokesperson for the finance ministry, said.

He had joined the Aaj News morning show to comment on the arrest of PTI leader Fawad Chaudhry on Wednesday morning. Muzammil, who joined the former government with the entry of Shaukat Tarin, has been wary of the ruling coalition’s handling of the economy.

He was of the view that Fawad’s arrest was an attempt to distract the people from the impending economic situation, which he described as a crackdown on the people.

“So, the illusion of Rs230 to the dollar will soon be broken.”

When asked about the rumours related to the doomsday scenario, he rejected it and blamed the government for the “mistrust”. However, Aslam went on to add that the people would have to “bear the brunt” of it.

He agreed with a suggestion for the government and opposition to sit together on the economic situation.

More to follow