ISLAMABAD-The Standing Committee on Finance and Revenue has directed State Bank of Pakistan (SBP) to take appropriate action against all the banks and exchange companies which were involved in volatility in the exchange rate.
The SBP has also been asked to access the extent of violation by both the entities and take appropriate action so that no one has the audacity to play with the economy of the country. The committee met under the chairmanship of Mr Qaiser Ahmad Sheikh, MNA in Parliament House, Islamabad.
The committee was of the view that during recent volatility in the exchange rate and the difference between the interbank rate and the rate offered by exchange companies, the banks earned exorbitant profits. The SBP Governor Jameel Ahmad informed that investigations had been launched regarding the role of banks in exchange rate manipulation. He said that the SBP has issued show-cause notices to some banks. He added that the rest of the banks would be investigated in the next phase.
The committee was apprised that few banks and forex exchange companies were suspected of volatility in exchange rate. The SBP taking cognisance initiated strict monitoring of the foreign exchange operations of banks and exchange companies and inquiry proceedings into the violations of SBP regulations. He assured that violators would be penalised upon finalisation of inquiry. The committee members expressed serious concerns over the banks role in currency manipulation, which led to increase in prices of petrolatum products and others. They have demanded strict action against banks involved in currency manipulation. Minister of State for Finance and Revenue Dr Ayesha Ghous Pasha informed that the SBP would take action against the banks involved in exchange rate manipulation after investigation. She further said that the government has not violated the IMF agreement by reducing the oil prices as the government had space to cut the prices. She said that the government would hold negotiations with the IMF in next few weeks. The floods had deteriorated the economic situation of the country as the GDP growth could decline to 2 percent, she added.
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The SBP governor further apprised that SME sector was the backbone of the country’s economy which had not been extended finances which it deserved. He said that there was no condition of financing against collateral only. He said that on basis of cash flow, the SME sector can avail credit from commercial banks. He said that a scheme is being fine tuned and would be launched for SME sector soon. The committee directed the SBP to monitor that credit is extended to the SME sector.
Regarding incentives given to the industrial and trading sector during COVID-19, the SBP governor said that the bank adopted multi-pronged approach to facilitate industrial and trading sector. He said that those measures included debt rescheduling, financing to large and medium industries for carrying out their operations besides avoiding retrenchment. He also informed that export based industries were also promoted. The committee pointed that the measures taken by the SBP were exceptional but the benefits did not trickled down and financial incentives were mostly availed by large scale industry. The committee directed the SBP to provide details of sector wise detail about who benefited from those incentives. The committee also decided to discuss the proposed measures for rehabilitation of the flood affectees, agriculture and commercial sectors in its next meeting. The committee was of the view that devastation caused by floods was massive and it needs proper thinking and perpetual fiscal policy measures.
While discussing the issues of SBP restriction on import of fork-lifters, the committee was of the view that the industry was suffering and the bank should look into this. The representatives of the importers association apprised that due to restriction imposed by SBP, commercial banks had stopped confirming letters of credit. The SBP governor informed that there was no restriction on LCs opened before 5th July, 2022. The committee also asked the FBR to looking into the restriction of pasting invoices and packing lists in the containers of PVC resin. The committee meeting was attended by members of the committee, minister of state for finance, secretary finance, chairman FBR, governor SBP and other senior officers of the departments concerned.