KARACHI: Currency dealers in the banking market have reported a sharp 50 per cent decline in dollar sales by money changers this month, amid concerns that the grey market has re-emerged, buying dollars at higher prices.

Dealers indicated that while remittance inflows remain unaffected, with July witnessing $3.2 billion in transfers, the drop in open market sales could destabilise the exchange rate.

Money changers explained that the strict documentation requirements for dollar purchases are limiting their sales, with only transactions of up to $500 not raising any questions. According to bankers, the open market has sold around $115 million to the banking sector this month, significantly lower than the same period last year.

“The open market is running low on dollars. They are only selling what they receive from the public, which suggests that someone is purchasing dollars before selling them to money changers,” said a money changer, who requested anonymity.

While sales may rise this year, the money changers estimate that it is unlikely they will exceed $200m in sales for August. By comparison, the average monthly dollar sales by money changers stood at $350m during FY25, while July FY26 saw $300m in sales within the banking market.

Money changers report a 50pc drop in dollar sales this month

Money changers are also expressing concerns over the resurgence of illegal markets in major cities, where exchange rates are not fixed, ranging from Rs287 to Rs292. This has attracted individual sellers, as well as some buyers seeking dollars for tuition fees or medical expenses abroad. Despite the higher rates, it remains challenging to secure dollars for such legitimate needs.

The official dollar exchange rate has been falling against the Pakistani rupee following a crackdown on smugglers and illegal operators. Since the operation began, the dollar has dropped by Rs4 in the open market, from Rs288.50 on July 22 to Rs284.50 currently.

Bankers confirmed that the decline in open market sales is unrelated to government changes in incentives for banks and money changers. They also noted that remittance inflows remained robust in July. However, they pointed out that price controls could be allowing illegal market players to exploit the situation by offering higher rates, which could destabilise the exchange rate.

While the government has made efforts to reduce the dollar’s value, these measures have not had the desired effect. Despite the crackdown, the dollar’s price remains volatile in both the open and inter-bank markets.

Some analysts believe that the market could stabilise with higher foreign exchange reserves, continued remittance inflows, and improved relations with the US and China. They suggested that the State Bank should avoid large-scale dollar purchases, as it did in FY25, to ensure market liquidity and stability.

Published in Dawn, August 24th, 2025