Daily Times

PESHAWAR: Many Foreign currency exchange dealers in Peshawar are mournful about the unstable exchange rates for the US dollar as it climbed up from 105 last week to 107.20 against the Pakistani Rupee on Saturday.

Pakistani rupee, already under pressure against the US dollar (USD) along with other regional currencies has become more fragile after traders and forex dealers shunt it in Afghanistan in favour of Indian rupee.

The Pak rupee was one of the favourite foreign currencies in Afghanistan till a week ago and was selling at 106 per $1. But its status changed soon after Kandahar Governor announced a ban on dealings in the Pakistani currency. It suffered further after a similar announcement came from Kabul regarding a complete ban on the Pak rupee.

As of Saturday, the foreign currency markets in Afghanistan’s capital Kabul, Kandahar and Jalalabad were accepting 109.5 rupees per USD. The higher exchange rates have on one hand made the rupee a least favourite currency as traders are getting rid of it on urgent basis without caring for the loses they faced.

On the other hand, it has also triggered an illegal transfer of USD from Pakistan into Afghanistan as those smuggling the currency can bag at least Rs 2.5 extra per dollar. The high profit has lured many in the forex business to secretly shift the USD from Pakistan and earn more Pak rupees in Afghan markets.

“Many dealers see this as an opportunity to earn quick money. A pack of $10,000 can earn you Rs25,000 in quick time. People are shifting hundreds of thousands of dollars in black into Afghanistan daily,” said Zakirullah, a foreign currency dealer in Peshawar’s Chowk Yaadgar.

In contrast, businessmen importing goods from the outside world are facing with losses as they end up paying more money due to expensive dollar. “The vehicles I purchased in Japan cost me in USD and higher exchange rate for dollar will mean I have to pay more customs duty on the cars. As a result I will end up losing money instead of earning profit,” said Irfan Khan.

He also informed that he lost more than two million rupees in a single day because of the sharp rise in dollar prices.

The stable Inter-bank exchange rates have so far kept things tidy as people are not panicking to take out their forex savings from banks, particularly in Peshawar where the currency rates are hopping around.

Abid Qamar, Director External Relations Department at the State Bank of Pakistan (SBP) Karachi believes the negative impact will not be severe as the instability of dollar will soon halt.

“There are multiple effects of the fluctuations of currency rates but net effect will determine where things are heading. I don’t see abnormal changes in the exchange rates at the moment as market fluctuations happen frequently,”

“However, if the fluctuations remain in one direction for long then it has negative effect as imports become expensive. That is countered by the exports comparativeness and the net effect of the two determines the final impact on the market”.

Abid Qamar also see the current rise in the dollar rates as temporary that is created by the sudden repatriation of Afghan refugees to their country. “The refugees are all of a sudden buying dollars in return for Pak rupees and that has contributed to the rise in the value of dollar. As the refugees return slow down, the market will become stable,” he said.

“The demand for the USD is putting a pressure on the market. However, If the market meet their demand without facing too much pressure, it will be able to recover soon,” he added.

Meanwhile Zahid Shinwari, senior vice president Pak-Afghan joint chamber argues that expensive dollar is very harmful for the economy because Pakistan is a big importing country.

“We import good ranging from petroleum to pulses and many other food items. All the import is done USD and expensive dollar will mean expensive imports. It will also increase cost of business for the industries as 90 percent of the raw materials for our industries is imported,” he explained.

The impact of rise in dollar will also have a dangerous effect on the loans Pakistan owe to other countries and international aid agencies. “Pakistan currently owes $65 billion dollars and a rise of one rupee in the price of dollar means 65 billion rupees rise in our loan. This means further payments on our loans,” Zahid Shinwari claimed.

“Similarly our balance of account is very disturbed. Pakistan’s exports does not exceed $25 billion whereas our imports are about $39 billion per annum. The current account deficit is too large,” he said.

However, Zahid Shinwari is positive that things will settle down soon. “The impact of a ban on dealings in Pak rupee in Afghanistan is a reason for the hike in dollar price but it will not have severe affect our economy as Pakistan has already decreased its exports to Afghanistan from $ 2.5 billion to $ 1 billion in recent years,” he added.