“T o stabilize the rupee, the government needs to bring reforms and address the existing deficiencies in the foreign exchange market,” said Muhammad Azfar Ahsan, former Minister of State for Investment and Founder of CORPORATE PAKISTAN GROUP.
Applauding the measures taken by the government and the State Bank of Pakistan (SBP), he said, “Positive results are increasingly apparent, which give hope for economic revival.”
In the past the State Bank of Pakistan has directed 10 banks to set up their own exchange companies to facilitate the customers in the sale and purchase of forex, while it has also advised the banks to provide such facilities from their 15,000 bank branches. The decision will also end the separate regulations of A, B and franchise exchange companies, meaning implementation of uniform rules and regulations for the forex trade in the country.
Supporting the banks is a decision in the right direction, as they are playing a pivotal role in the overall economy of the country by paying taxes and providing employment opportunities, whereas the exchange companies are only giving benefits to a few individuals and are engaged in unethical practices.
He also observed that the commitment of the Chief of Army Staff (COAS) to combat smuggling can play a catalytic role in the forex market reforms process. “Smuggling has not only resulted in the evasion of duty and taxes but has also had a profound impact on the exchange market,” said Muhammad Azfar Ahsan, adding that the role of law-enforcement agencies cannot be overstated, as they have implemented effective measures to combat illegal trade and discourage the black market.
According to Muhammad Azfar Ahsan, the significant reduction of up to Rs.40 in the price of petroleum products has not only helped the rupee gain its value against the greenback but also offered some relief to consumers.
To counter the black market, both the government and law enforcement agencies have introduced stringent measures aimed at narrowing the gap between the open and interbank markets. Regarding the issuance of licenses to the exchange companies, the former Minister of State said that the SBP’s recent regulations have effectively abolished licenses for A-type, B-type, and franchise exchange companies, thereby moving towards a uniform and regulated capital framework. “This move is set to pave the way for new, reputable exchange companies to operate transparently, offering superior services to their customers,” he added.
Further, the increase in the minimum capital requirement for the exchange companies from Rs. 200 million to Rs. 500 million, coupled with investments from 10 major banks, promises to alleviate the capital shortage that has long plagued the exchange market, he noted.
For Muhammad Azfar Ahsan, these initiatives are indispensable for safeguarding the stability and growth of Pakistan’s exchange market. “The ripple effect of improvement in the rupee value and eradication of the black market would improve the overall economic conditions of the country,” he said, adding that the financial stakeholders and regulatory bodies should jointly play their role in ensuring the sustainability of reforms.
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