ISLAMABAD: As a result of a crackdown on smuggling and illegal exchanges, the Pakistani rupee actively emerged as the best-performing currency in the world in September.
The currency appreciated from Rs305.54 against the US dollar on August 31 to Rs287.74 on September 28 against the greenback, marking a Rs17.8 increase or a 6.2% rise. The rupee is currently on a winning streak of 17 sessions, during which it has gained nearly 7% after hitting a record low of 307.1 on September 5.
The currency market was closed on Friday, September 29.
Mauritius rupee came second on the list with a 0.7% appreciation, while the Hong Kong dollar stood third on the list, showing a 0.2% improvement in September, as reported by brokerage house Arif Habib Limited (AHL) on Friday.
Experts attribute the rupee’s appreciation to government administrative measures against dollar smuggling and hoarding.
Sana Tawfik, an analyst at AHL, explained, “The appreciation comes amid a crackdown against informal channels that are used to smuggle currencies into neighboring countries. These administrative measures have clamped down speculative and hoarding practices in informal markets.”
During the month, the State Bank of Pakistan (SBP) also announced structural reforms aimed at the Exchange Companies (ECs) sector. Among these measures, the SBP actively directed commercial banks to establish their own ECs as wholly-owned subsidiaries. The SBP also increased the minimum capital requirement for ECs from Rs200 million to Rs500 million.
Sana Tawfiq added, “The rate between the open- and inter-bank market is narrowing. We could possibly see remittances improve, and reach up to $2.4 billion in the coming months. The materialization of external flows would further alleviate pressure on the rupee.”
Mohammed Sohail, CEO of brokerage house Topline Securities, expressed similar views. Sohail stated that the improvement comes after the government and regulators took steps to control illegal currency trade and smuggling.
He further noted that the Pakistani Rupee had gained 6-9% in the inter-bank market against three major currencies, including the USD, UK Pound, and Euro, in the last few weeks. In the open market, it had gained 11-13%, eliminating the premium of the open-market rate, despite the US Dollar index reaching a 10-month high.
Sohail also addressed that the International Monetary Fund (IMF) views the perception of the recent crackdown as ‘market intervention’. He further clarified that the aim was to actively enforce compliance rather than engage in intervention.
