The Pakistani rupee became the best-performing currency in the world in September as a result of a crackdown on smuggling and illegal transactions.
The value of the rupee increased by Rs17.8 or 6.2% from Rs305.54 on August 31 to Rs287.74 on September 28 when compared to the US dollar. The rupee, which touched a record low of 307.1 on September 5, is currently on a winning streak of 17 sessions during which it has increased by about 7%.
Friday, September 29 was a trading holiday for currencies.
According to information provided by a trading business, the Hong Kong dollar improved by 0.2% in September, while the Mauritius rupee rose by 0.7% to place second on the list.
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According to experts, the government’s administrative tactics against dollar smuggling and stockpiling are to blame for the rupee’s recent run of appreciation.
According to Sana Tawfik, an analyst at AHL, “the appreciation comes amid a crackdown against informal channels that are used to smuggle currencies into neighboring countries.”
“These administrative measures have curbed informal market hoarding and speculation practices.”
Additionally, the State Bank of Pakistan (SBP) proposed structural reforms aimed at the sector of Exchange Companies (ECs) during the month.
The announcement of measures includes a directive from the central bank for commercial banks to form their own ECs as fully owned subsidiaries. The SBP further ordered to increase the minimum capital requirement for ECs from Rs200,000,000 to Rs500,000,000.
“The spread between the open-bank market and interbank rate is decreasing. Remittances may increase and get as high as $2.4 billion in the upcoming months, according to Tawfiq.
The rupee would see even less pressure if external flows materialized.
Mohammed Sohail, CEO of the brokerage firm Topline Securities, shared similar views.
Sohail claimed that the improvement happened “after the government and regulator started taking steps to control the illegal currency trade and smuggling”.
In a post on the social media site X on Friday, Sohail stated that “PKR gained 6-9% in the inter-bank market against three major currencies, i.e. USD, UK Pound, and Euro, in the last few weeks.”
Despite the US Dollar index reaching a 10-month high, “in the open market, it gained 11–13%, eliminating the premium of open-market rate,” he continued.
“It is sad that just a few people are referring to this crackdown on Hawala commerce and smuggling as intervention or force. Sohail dispelled the notion that the current crackdown would be considered as’market intervention’ by the International Monetary Fund (IMF). “We are so used to doing illegal things that once compliance is being made, we termed that as Danda,” he remarked.
One of the primary requirements stipulated by the Pakistani government when they signed the $3 billion Stand-By Arrangement (SBA) with the IMF in July to prevent a sovereign default is a market-based exchange rate.
