SBP disputes claims of dollar price limits. resulting in a loss of $3 billion in remittances
KARACHI: The State Bank of Pakistan (SBP) on Sunday disputed claims that dollar price limits cost $3 billion in remittance and export losses, ARY News reported.
“Goods exports face headwinds due to lower demand in international markets. This is because most of our major trading partners are entering a period of financial austerity,” the central bank said in a statement.
It also noted that the US federal funds rate has increased from 0.25 percent in March 2022 to 4.5 percent so far. This clearly indicates the financial rigor around the world.
SBPAC went on to say that inflation has risen sharply in developed countries. which consumes the purchasing power of consumers “These are coupled with domestic factors such as floods and supply disruptions. As a result, exports are negatively affected.”
“In this background Linking declining exports to a relatively stable exchange rate is inappropriate,” the central bank added.
To elaborate further, the SBP said workers’ remittances were gradually increasing. That’s down from an all-time high of $3.1 billion reached in April 2022 due to Eid-related hype.
“This decrease is mainly due to the global economic slowdown. Due to higher inflation in developed countries, the cost of living abroad is higher. This will reduce the surplus funds that can be sent back to the homeland as remittances.”
Moreover State Bank said When international travel starts again after COVID Some remittances have reverted to FCY cash transfers via overseas Pakistanis traveling to Pakistan.
“Therefore, the decline in Pakistan’s exports and remittances is due to a number of external factors and domestic reasons. And it would not be appropriate to set it as the exchange rate only,” the report added.
Related to mention here though. Association of Exchange Companies of Pakistan (ECAP) has decided to withdraw limit on US dollars in a bid to end ‘artificial’ demand in the market.
In a statement, ECAP secretary-general Zafar Paracha said the association was removing the limit on the US dollar in “National interest” because such limits have negative consequences.
The statement states that there is an artificial demand in the market as people will buy dollars from us and sell them on. gray market.
“The result is Businesses move from formal channels to gray channels. It’s not just damage to the reserves. it also damages exchanges,” added Zafar Paracha.