ISLAMABAD — Will kerb market in forex go up or down? Is it heading to a boom or bust? These are the questions being now debated by kerb market operators, Finance Ministry and central bank officials, as well as families of expatriates who receive remittances from abroad particularly Gulf, Saudi Arabia, Middle East and United States. The questions have become relevant in the post-September months. This period saw the kerb market premiums in dollars, dirhams and riyals almost totally wiped out. As the premium, that in the past, often ranged even between Rs.2.30 to 2.50 to a dollar, disappeared, remittance diverted from “hawala’ or ‘hundi’ to commercial banks are shooting up.
The remittances, in fact, rose 125.7 percent over the last nine months to $ 1.543 billion, compared to the like period of fiscal 2001, when it was $683.5 million, State Bank (SB), the central bank says.
Bankers estimate remittances will rise to $2.0 billion for the whole of fiscal 2002. However, the Ministry of Finance and the SB were projecting the amount at $1.87 billion. But, the latest official thinking is divided between a lower and a higher inflow. With an easing of US-led international surveillance of money transfers, and enforcement of anti-money laundering operations, the increase can be less than this. The other view is that as a result of wiping out of the premium between the kerb and the interbank rate, remitters are likely to prefer using commercial banking channels, rather than ‘hawala’ or ‘hundi.’
However, the new projection for the whole year is around $1.72 billion.
The IMF reportedly shares this view, because an easing of monitoring of remittances is likely to happen.
However, Pakistani banks operating in the Gulf, Middle East and elsewhere, as well as their correspondents, are now trying to cash on pro-bank sentiment.
They have now, belatedly geared themselves up, deploying high-tech transfer facilities and even going to concentrations of Pakistanis at their worksites to collect remittances for transfer back home.
More dollars started flowing into Pakistan through commercial banks because under the post-September uncertainties, remitters feared their money may get trapped if one or the other account is frozen under US pressure and monitoring of transfer of funds to starve “terrorists” of funding.
With kerb market premiums down from, Rs.2.30-Rs.2.50 to merely Rs.0.30 to a dollar, expatriate home remittances from United States, through commercial banks, rose to $483 million in the first nine months of the current fiscal, from only $95.25 million in the like period of fiscal 2001. Remittances from the United Arab Emirates rose to $348 million from $157 million in the two comparable periods. Such inflows from Canada, Germany, Bahrain, Japan, Norway, Qatar, United Kingdom and a string of other countries also went up, bankers say.
The increased inflow of forex have also led to depreciation of the dollar by 6.5 percent during nine months ended March. It also pushed remittances into the banking channels. Where are the increased inflows of remittances headed? Although it is still early to gauge such investment, but real estate prices in Karachi, Lahore, Islamabad and other major cities have started moving up. Investment in real estate is the most-preferred of all by expatriate Pakistanis and their families at home. Gold bullion and shares are still other options. Blue chips shares have seen some increased investment activity in the last few weeks, the bourses report.
The market also reports increased investment in gold bullion and jewelry. It is inspite of the fact that at the weekend international gold price at $308 an ounce is the highest in recent months. Similarly, the ruling price of Gold Tezabi 24-carat over the weekend was an all-time high of Rs.6,010 per 10 grams in Karachi and Rs.6,035 in Lahore.
Investment in new cars has also seen some money flowing in. All the major makes, including Toyota Corrolla and Honda are promising deliveries after two to six months in view of strong demand, as production is geared up.
But, investing in forex may not be a very good idea at the moment because the kerb and interbank rates are close to each other, leaving hardly any premium
