The State Bank of Pakistan (SBP) has completed its probe into the alleged involvement of commercial banks in exchange rate manipulation, Governor Jameel Ahmad announced on Wednesday, adding that it will make the report public on Monday (Jan. 23).
Addressing the Federation of Pakistan Chambers of Commerce and Industries (FPCCI) in Karachi, he said “strict action” would be taken against anyone found guilty of manipulation. “Rest assured all commercial banks involved in manipulating the exchange rate will be held accountable,” he stressed.
Referring to mounting concerns over Pakistan’s foreign exchange reserves—currently at less than $4.5 billion, their lowest level in nine years—he said the country expected to receive dollar inflows from “next week,” which would help bolster the funds. Once these inflows have been received, he said, it would become easier to remove restrictions on imports.
All manner of industries have been complaining about the import restrictions, which were imposed on “non-essential” goods in May to avert a balance of payments crisis and stabilize the economy. However, as many of these goods are used as raw material by export-oriented industries, businesses have complained of being unable to continue production, forcing them to either shut down or scale back their operations. Last month, the SBP allowed banks to resume issuance of letters of credit for export-oriented and essential goods, but the length of the restrictions has created a significant backlog that is hampering speedy clearances.
Explaining that it takes time to verify requests for LCs, Ahmad said that the SBP had already cleared around 33,000 LCs “with special consideration for raw material imports used in goods which are exported.” He said commercial banks had also been directed to prioritize LCs for the import of food, medicines, and oil. “We want to facilitate all the industries, however we can only do so under our given capacity of inflows. We do not produce dollars locally, they come through exports, remittances and inflows from lenders,” he said, adding that the central bank was working to improve its capacity.
Assuring the FPCCI that the SBP was aware of the business community’s problems, the governor claimed measures were being taken to control the current account deficit. He said the SBP would carefully evaluate proposals provided by the business community, and soon launch an action plan in this regard. He also assured the business community that the central bank would ensure the approval of 365-day or over LCs from banks, adding it would also facilitate the release of already-secured project loans.
Prior to Ahmad’s address, representatives of the FPCCI highlighted the issues they were facing in the operations of their businesses. Former FPCCI president Mian Nasser Hyatt Maggo warned of rising unemployment and inflation if the supply chain hurdles were not removed. Slamming the SBP and Ministry of Finance for working without any visible plan, he claimed that prices of even pulses could shoot over Rs. 1,000/kg if the situation were not fixed.