Currency dealers count rupees and US dollars in Islamabad.—File photo

KARACHI: Rupee’s value in the currency market is reflective of its true position, experts and bankers said here on Saturday suggesting that there was no need for the government to further devalue the local currency.

They said that the currency market was relatively un-moved from the frequent reports of International Monetary Fund (IMF) suggesting the government to further devalue the local currency and voicing its concerns on declining foreign exchange reserves of the country.

Representatives from the State Bank of Pakistan (SBP) are expected to meet currency dealers next week to discuss the exchange rate position. “A meeting with SBP over exchange rate is expected by Monday to discuss the current situation following the sharp decline in foreign exchange reserves of the country and widening fiscal deficit,” said Zaffar Paracha, general secretary of Exchange Companies Association of Pakistan (ECAP).

He said that the appreciation in dollar has not resulted in a panic in the market unlike in July when rupee devalued by 5 per cent pricing the dollar over Rs128 in the inter-bank and about Rs134 in the open market.

However, after general elections, dollar fell back sharply to around Rs121 in the inter-bank reaching Rs111-113 in the open market with negligible demand for the greenback.

The dollar has been on an appreciating trend reaching Rs124.30 in the interbank market on Oct 5, with rates in the open market reaching Rs127.80 on Saturday.

He warned that an immediate devaluation could result in market disequilibrium similar to earlier instances when banks were offering high price of dollars and open market trading was much below the official rates.

“The banks’ exchange rates are generally regulated by SBP but the open market offers a truer picture of the exchange rate,” said a senior banker who deals with the currency market adding that the dollarisation has also stopped.

The SBP’s latest report shows that dollar holdings of commercial banks also decreased during the week ending Sept 28. The dollar reserves with commercial banks have fallen by $195 million down to $6.484 billion since July.

“Individuals looking to buy large amount of dollars to send their ill-gotten wealth abroad are in trouble, so there hasn’t been a surge in buying, no panic in the market and no dollarisation at the moment,” despite multiple calls for devaluation from IMF said Mr. Paracha.

Published in Dawn, October 7th, 2018