A growing dollar shortage in Pakistan’s interbank market is triggering fresh volatility in the exchange rate. With ongoing geopolitical tensions, including the Iran-Israel conflict and recent skirmishes between Pakistan and India, banks are now offering rates above official levels to attract remittances, while importers are paying a steep premium to secure dollars.
Banks Raise Rates to Lure Inflows
Banks are offering remitters Rs3 to Rs4 more per dollar than the official interbank rate to increase inflows. On Friday, the interbank rate hit Rs283.70 — the highest since December 2023. However, importers were being quoted between Rs284.25 and Rs284.50. In the open market, the dollar traded at Rs285.70.
“The shortage is pushing banks to raise rates aggressively,” said Faisal Mamsa, CEO of Tresmark. “Importers are bearing the brunt, often paying Rs2-3 above the interbank rate.”
Read: Gold Prices Edge Higher in Pakistan Amid Global Uncertainty
Exporters Hold Back, Squeeze Supply
Exporters, expecting further rupee depreciation, are delaying the conversion of their proceeds. This move is tightening the already strained supply of dollars. The ongoing conflict in the Middle East has further dampened confidence in the rupee’s near-term outlook.
Zafar Paracha, Secretary General of the Exchange Companies Association, denied a shortage in the open market but acknowledged that the rupee had weakened against major global currencies. For example, international platforms offered Rs392.78 for the British Pound, while local rates stood at Rs380.
Dollar Weakens Globally, Adds Pressure
Globally, the US dollar has also weakened, falling to around 98 on the DXY index. Despite this, the local demand for dollars remains elevated due to import needs and uncertainty.
SBP Intervenes to Boost Reserves
The State Bank of Pakistan continues to buy dollars to meet IMF reserve benchmarks. With an expected $3.4 billion in external inflows, the country hopes to raise reserves above $20 billion. However, traders estimate a current shortfall of $300–400 million in the interbank market.
Experts predict that while pressures will persist, the government will resist a sharp devaluation to control inflation and avoid political fallout. The rupee may hover near Rs285 in the coming weeks.
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