Pakistan’s foreign-exchange companies agreed to remove the limit on the dollar-rupee rate, a move that will effectively devalue the currency in the open market.
(Bloomberg) — Pakistan’s foreign-exchange companies agreed to remove the limit on the dollar-rupee rate, a move that will effectively devalue the currency in the open market.
The Exchange Companies Association of Pakistan, which had voluntarily decided to cap the exchange rate, will abolish the limit, President Malik Bostan said in a video released to the media Tuesday. It is not clear what will happen to the exchange rate in the interbank market.
The decision to remove the cap will curb the black market, where dollars are being sold at about 10% more than the advertised rates, and bring back the supply of the greenback at money changers. A more market-determined currency may also help Pakistan secure more money from the International Monetary Fund, whose disbursement of loans to the nation has seen multiple delays.
“The cap that we had placed for the betterment of the country has turned out to be negative,” Bostan said. “We will first speak to the central bank, explain to them how we need to fight the forces of the black market, how this will help the country, the disadvantage.”
As the supply of the US currency increases, the dollar-rupee rate will slowly decline and the black market will end, he said.
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