Pakistan’s exchange rate has deteriorated by around 12% since early May 2021 in response to the escalating current account deficit as the government went for expansionary monetary and fiscal policies fueling domestic demand and imports to achieve brisk economic growth. This resulted in high demand for the US dollar to pay for imports resulting in massive depreciation of Pakistan’s rupee.
However, the State Bank of Pakistan (SBP) on October 6, 2021, announced that it would take measures to curb the undesirable outflow of foreign currency, in the wake of constant depreciation of the local currency against the US dollar. Through the implementation of the recently announced measures, the central bank aims to enhance transparency in foreign currency transactions by exchange companies. According to the central bank, travellers to Afghanistan will be allowed to carry only $1,000 per person per visit, with a maximum annual limit of $6,000. Moreover, exchange companies will be required to conduct biometric verification for all foreign currency sale transactions equivalent to $500 and above and outward remittances. This requirement will be applicable with effect from October 20.