ISLAMABAD - Finance Division has officially asked the governor of State Bank of Pakistan (SBP) to initiate an inquiry into the sharp deterioration of PKR-US$ exchange rate in the interbank market on July 5 and to send a report in this regard within a period of ten days.
The inquiry has been recommended by Finance Minister Ishaq Dar in his capacity as chairman of Monetary and Fiscal Policies Coordination Board. On 5th July, the US dollar surged to its 2.5-year-high against the Pakistani rupee in the interbank market, touching Rs108.25. The US dollar gained Rs3.12 in a single day (Wednesday) and reached Rs108.25. Dollar value was Rs104.9 on Tuesday.
Finance Minister Ishaq Dar took the notice and chaired a meeting with presidents of banks to review the situation of increase in dollar value. Dollar value came down to Rs105 due to notice of the finance minister. The federal government had held acting SBP Governor Riaz Riazuddin responsible for the sudden spike in the dollar value in the initial investigation. Ishaq Dar announced to conduct transparent investigation into the matter in next ten days to gather all the facts, including who profited and who bore losses from this hike. A day after sharp increase in dollar value, the government appointed former secretary finance Tariq Bajwa as Governor State Bank of Pakistan (SBP) for a period of three years.
The sudden depreciation of Pakistani Rupee versus the US Dollar led to speculation and anxiety in the foreign exchange market. On the same day, i.e. 5th July 2017, the finance minister took immediate notice and action on this matter. He called for a detailed report from the State Bank of Pakistan (SBP) on this artificial and unnatural deterioration in the PKR-US$ exchange rate, and he called an emergent meeting with presidents/CEOs of banks on 6th July. Finance minister’s immediate notice and action resulted in stabilization of Pak-US$ exchange rate in the interbank market to Rs. 105.50 per US$ on 6th July when the financial markets opened.
It may be noted that under the State Bank of Pakistan Act 1956, the Monetary and Fiscal Policies Coordination Board, comprising of the Federal Minister for Finance (chairman) and other members, including Governor SBP and Finance Secretary, is responsible for coordinating the exchange rate policy as well as the fiscal and monetary policies, to ensure consistency among macroeconomic targets. However, the sharp deterioration of the exchange rate on 5th July 2017 occurred due to the fact that members of the Monetary and Fiscal Policies Coordination Board, including the Finance Minister and Finance Secretary, were not taken on-board on the matter.
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