KARACHI: The banking currency market is again operating on a dual-rate system, where dollars are selling at a premium compared to the official exchange rate, particularly impacting small-scale importers, banking sources said on Saturday.

The discrepancy comes even though there are no official restrictions on imports or the opening of letters of credit (LCs).

Atif Ahmed, a currency dealer in the interbank market, said that while a few importers could still access dollars at the official rate, most, especially small importers, were charged Rs2 to Rs3 more per dollar than the official rate quoted by the State Bank of Pakistan (SBP).

Bankers noted that opening LCs became relatively easier during the government`s recent discussions with the International Monetary Fund (IMF). In its report, the lender has expressed concerns about Pakistan`s exchange rate policies, advising against administrative measures tocontrol currency movements.

The SBP denies intervening in the banking sector`s currency market, but bankers allege receiving verbal instructions from the SBP. They claim that sometimes the central bank opens the exchange rate in the morning, and the banks are supposed to follow that rate.

Before September, the open market was plagued by a parallel market thatseverely disrupted the official exchange rate, diverting some $4 billion in remittances to illegal channels.

However, a crackdown on this illegal market in early September led to a significant drop in the open market exchange rate, with the rupee strengthening from 330 to 277 against the dollar.

The dollar has recouped some of those losses recently, appreciating in 17 consecutive sessions before declining byRs1.64 in the last two sessions. Currency experts and analysts have been questioning the strength of the current exchange rate`s fundamentals.

An expert and currency analyst said that as soon as the staff-level agreement was reached with the IMF, the top machinery of the financial sector unleashed tough restrictions on imports.

`The verbal intervention was accompanied by market tactics to bring down the dollar against PKR,` said Faisal Mamsa, CEO of Tresmark. `Allegedly, import payments were postponed, new LC issuance was restricted and oversight in market trading was intense.

This intervention resulted in the rupee recovering from a 17-day losing streak, climbing from 288 to 286.50 against the dollar. Despite a 30 per cent drop in forward premiums (with oneand three-month rates ending the week at 190 and 430 paise), exporters have started selling forwards again, he said.

The market now estimates that the rupee will strengthen to around 282 against the dollar, at which point the SBP is expected to resume dollar buying, he said, adding that positive developments, such as loans from multilateral organisations and the loan instalment`s approval from the IMF`s board of directors, are expected to keep the rupee buoyant.