Chairman Forex Association of Pakistan (FAP) Malik Bostan Khan has urged the government to immediately implement currency swap arrangement with China and Middle East to strengthen Pakistani rupee.
He hoped that China, which is Pakistan’s Iron Brother’ would facilitate the prompt implementation of currency swap agreement and Pakistan could import from China in local currency.
Advisor to Prime Minister on Finance Abdul Hafeez Shaikh held a meeting with a high level committee, which was formed by Prime Minister Imran Khan and Malik Bostan Khan on May 15, 2019, in Islamabad on Tuesday.
The committee includes Chairman Forex Association of Pakistan (FAP) Malik Bostan Khan, President ECAP Sheikh Allauddin, Governor State Bank of Pakistan Reza Baqir, DG FIA Bashir Memon, DG IB and Member FBR.
During the meeting, Malik Bostan suggested that Pakistan should immediately implement currency swap agreement with China, as Pakistan imports around $18 billion worth of goods from China a year while Pakistan’s exports to China were only $2.0 billion.
Bostan said currency swap arrangement with China would help stabilize Rupee value and increase country’s foreign exchange reserves.
Similarly, Pakistan imports $15 billion worth of oil from Middle East and if these imports could be made in local currency through a swap arrangement, the interbank demand for dollar would decline by $30 billion a year and the USD would ease to Rs140 from Rs150 currently.
Bostan said masses had responded to their appeal of boycotting dollar and investing in local currency. He informed that people were selling USD, AED, Euro, GBP etc, due to which the USD rate had come down to Rs150 from Rs154.
Exchange companies surrendered $15 million through commercial banks in the interbank market in the last three days while $15 million were forward booked, which would be credited into the interbank market by Wednesday, May 29, 2019. In this way exchange companies provided $30 million to the government.
Advisor to Finance and DG FIA agreed to the proposal of exchange companies that FIA would not visit licensed exchange companies for checking without the representative of SBP.
Exchange Companies Association of Pakistan made the following recommendations:
1. Presently over 170 international money transfer companies bring $10 billion worth of worker remittances in collaboration with commercial banks under inward workers’ remittances. Government pays these companies Rs6/transaction as rebate while local exchange companies are not paid any rebate for bringing the remittances. If the government pays only Rs2/transaction to the exchange companies and they are permitted to make inward remittances agreements with the international money transfer companies, they could bring $7-8 billion and provide the government with $5-6 billion, while the government would save billions of rupees and rupee would be strengthened.
2. Government should impose economic emergency for one year and prohibit import of all luxury products and goods that are locally produced, which would save $15 billion a year.
3. Government should link opening of Letter of Credit (LC) with deposit of 100 percent margin by importers. This would bring USD by Rs10 at least. This condition should remain in place until Pakistan’s forex reserves reach $50 billion.
4. Government should ban deposit of cash dollar by exporters in their foreign currency accounts and bind the exporters to bring the export receipts through banking channels.
5. Travelling quota should be reduced to $5,000 from $10,000. Around 9,000 passengers fly to Dubai every day and these passengers carry with them at least $10 million every day.