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Pakistan's dollar restriction did not cost it $3 billion: SBP. The State Bank of Pakistan (SBP) stated on Sunday that the dollar cap implemented to stabilise the rupee's currency against the greenback did not result in a $3 billion loss to the national exchequer.
To relieve the dollar crisis in the market, satisfy IMF terms, and eradicate illicit currency markets, the government abolished the cap last week, sending the rupee down in the dumps in the previous two days.
Following two days of devaluation (Thursday-Friday), the local currency fell from 230.15 to 262.60 versus the US dollar in the interbank market. The rupee's value versus the US dollar fell by Rs32, or 14%, in total.
Financial experts, including former finance ministers Miftah Ismail and Dr Hafeez Pasha, claimed that the dollar cap cost the national treasury between $1 and $3 billion in losses because people preferred illegitimate channels to transfer money home, which offered a better rate than official channels.
The central bank described the loss claims as "incorrect," noting that a number of variables were to blame for the drop un Pakistan's exports and worker remittances.
The export of goods has been hampered by decreasing demand in overseas markets, as most of our key trade partners are experiencing monetary tightening, according to the bank.
The US Federal Funds rate, for example, has risen from 0.25% in March 2022 to 4.5% to date, indicating a considerable global monetary tightening, according to the bank.
Meanwhile, it claimed that inflation in the industrialised world has been substantially greater, eroding consumer buying power.
"These, together with internal reasons such as disastrous floods and resulting supply shortages, have had a detrimental impact on exports. In this context, attributing a dip in exports to a reasonably steady exchange rate is inappropriate."
The bank observed that worker remittances were steadily declining after reaching an all-time high of $3.1 billion in April 2022 owing to Eid-related flows.
According to the report, the reduction is mostly due to a worldwide economic slowdown, as increasing inflation in rich nations has increased the cost of living abroad, limiting the surplus cash that might be sent back to the homeland as remittances.
"In addition, with the return of foreign travel following COVID, some remittances have reverted to FCY cash transfers via abroad Pakistanis travelling to Pakistan."
"Thus, the drop in Pakistan's exports and remittances is due to a variety of foreign and local variables, and it would be inappropriate to attribute it just to the currency rate," the central bank stated.
