KARACHI: There are reports that exchange companies (ECs) have surrendered $ 20 million to the interbank market during the last two days as there is no demand in the market, Forex Association of Pakistan Chairman Malik Bostan said.

He said after almost one year, the free market exchange rate has reached below the interbank market due to action taken by the law enforcement agencies against the illegal currency traders.

“All credit goes to Army Chief Asim Muneer, who on the request of the exchange companies, has ordered strict action and set up a task force to control the black marketing and illegal trade of currencies,” he added.

For the past three days, the task force aggressively performed and took action against the illegal business of currencies and a number of culprits have been arrested by the law enforcement agencies, he added.

With this move, ECs have surplus dollars as there are no buyers in the market, he said and added that ECs are surrendering excess dollars to the interbank bank market.

Earlier this week, the rate difference in the interbank and open currency market rose to Rs 20, however, now things are being controlled and exchange rate in interbank and open currency market is on the decline.

“During last two days, ECs have surrendered twenty million dollars to the interbank market, resulting in the interbank exchange rate reduction, reaching Rs 305 from Rs 307,” he maintained.

He said on Thursday, the exchange rate in the open market reduced to Rs 302 to the dollar and there was no buyer in the market.

Bostan said there is need to keep monitoring these elements to avoid such bad practices in future and action should be taken on a permanent basis.

He also appreciated the government efforts to curb the smuggling saying that illegal trade was also a major reason behind volatility in the market.

He said the Special Investment Facilitation Council (SIFC) will also help bring more investment in the country, particularly in the mines and mineral sector. In addition, there are reports that some 20 to 25 billion dollars foreign investment will arrive. With the arrival of these inflows, the exchange rate will further reduce in coming months.

Bostan welcomed the SBP’s reforms for the ECs sector saying that this will help further streamline the exchange companies’ business. “There was a mixture of different exchange companies, now it will be easier for the State Bank to closely monitor the exchange companies’ operations,” he added. The SBP’s reforms will create a competitive atmosphere and promote corporate culture in the sector, he said.

Zafar Paracha, General Secretary, Exchange Companies Association of Pakistan said the Army Chief’s assurance of improvement in the economy has restored the investor confidence.

During the meeting with the business community, the Army Chief discussed all issues including corruption, foreign investment, smuggling, currency market and others.

He said a crackdown has been launched against all smuggling, including commodities and dollars and positive results are coming. The crackdown has reduced the prices of certain commodities besides improving the exchange rate in open currency and interbank markets.

Now, the exchange rate in the open market is less than the interbank and after a long time, the inter-bank rate has decreased by Rs2 as panic selling is not visible in the market, Paracha maintained.

Welcoming the ECs reforms, he said people are hopeful that the dollar will not become expensive again. In addition, exporters have also sold dollars in the market, he added.