Finance: Ignoring fruitful avenue

Pakistan is facing a severe foreign exchange crisis. The State Bank of Pakistan (SBP) has effectively stopped banks from retiring letters of credit or opening new ones if they don’t have enough foreign exchange of their own to do the same. The reason is the central bank’s forex reserves are too low to let banks and financial markets work normally. Only external debt repayments are being managed somehow. (On 16th December SBP’s forex reserves fell to a new low of $6.116 billion, barely enough to cover even five weeks of merchandise exports). Businesses, already struggling with energy woes, continue to protest over forex control measures. Forex rates quoted routinely in the interbank and open markets have become irrelevant. Since dollars are too hard to find, the only relevant rates are the “going rates”. Banks and forex companies are selling dollars at “going rates” to those willing to purchase, but only when dollars are available.