Dearth of dollars: Customers hit with massive gap in foreign currency transactions

The State Bank of Pakistan (SBP) is facing a shortage of dollars, which is forcing banks to turn to the open market rate to settle foreign transactions. This has caused a noticeable difference in the value of the US dollar between formal marketplaces in the country.

Customers are being advised to be cautious when using their debit or credit cards for foreign currency transactions.

Customers using their debit or credit cards for foreign currency transactions in Pakistan are being warned to be vigilant as the gap between the interbank rate quoted by the central bank and the open-market rate for the US dollar has widened by over Rs24.

A customer was charged Rs250.95 for a dollar transaction on January 3, when the official interbank rate was quoted by the State Bank of Pakistan (SBP) at Rs226.94 – a difference of Rs24.01.

The open market-determined payment system is causing inflation to rise, putting pressure on the government to properly balance the overall currency supply.

Despite the SBP stating the Pakistani rupee’s official value, the rate on the streets is notably higher. This has led to increased prices for items such as cars, real estate, and smartphones.

Experts warn that banks may try to make a profit by buying dollars on the open market at higher rates as the SBP has no plans to regulate the space.

The government is currently seeking external support, but the markets are signaling towards elections and a fresh mandate to revive the economy.

It is being warned that artificial controls on the currency will only drive inflation upwards and make life more difficult for the 230 million people living in Pakistan.