SBP Directs Banks to Closely Monitor Dollar Outflow Amid Tensions with India

Pakistan’s central bank, the State Bank of Pakistan (SBP), has directed banks to closely track the movement of US dollars out of the country, amid rising tensions with India. This directive comes as authorities anticipate that an increase in the ongoing conflict could lead to a surge in demand for the American currency, reported Dawn. Despite these concerns, citizens and businesses involved in currency exchange in both the official inter-bank system and the open market report that there has been no widespread rush to purchase dollars. They also indicate that the demand for the greenback has not yet increased noticeably. Furthermore, a currency trader highlighted a significant aspect of financial inflows into Pakistan. According to their assessment, more than 90% of the money sent to Pakistan from overseas workers is facilitated by exchange companies based in India, particularly those operating in the Middle East. This crucial financial pathway could face significant disruptions if the conflict between the two nations continues for an extended period. The dealer further cautioned that, in the event of a full-scale war, India might exploit these exchange companies as a means to exert pressure on Pakistan. Speaking privately, currency market insiders have confirmed that the majority of money sent to Pakistan from overseas workers is managed by exchange companies based in India. These Indian financial firms possess an extensive network that spans the Middle East, Europe, and the United States. Their operations involve collecting the local currencies of Pakistanis working abroad and then transferring the equivalent amount in US dollars to Pakistan through established banking channels. The SBP provides these Indian exchange companies with incentive payments ranging from approximately Rs. 15 to 20 for each US dollar they remit. These incentive payments are also made in US dollars.