KARACHI: The State Bank of Pakistan has launched a new forward rate facility under the amended remittance policy, which enables exchange firms to Lock Dollar Rates for short periods to avoid risks associated with fluctuations in currency value and enhance forex availability.
Under the new system, exchange companies will be able to make forward sales arrangements with authorized banks within five business days of the receipt of remittances, which will allow them to lock in their exchange rates.
The central bank further noted that the objective of the policy was to mitigate the risks of exchange rate volatility and provide assurance regarding foreign currency dealings especially remittances.
The inflow of remittances is still an important source of foreign exchange for Pakistan, with exchange companies processing $5 billion worth of remittances, and the total amount of workers’ remittances stood at about $38 billion in FY25.
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The participants in the market stated that this institution would be helpful in managing liquidity because it will allow exchange companies to match their transactions to the market circumstances.
This is what the SBP hopes will motivate people to send money back home using official channels because they would be more transparent, making it easier to exchange currencies.
The industry stakeholders reacted positively to this move, seeing it as an effective measure aimed at improving coordination between the regulator and the market players.
According to analysts, the use of forward rate agreements is in line with SBP’s overall initiative to modernize its financial structure, stabilize its foreign exchange market, and enhance its external stability.
Moreover, they noted that more reforms within the remittance industry would serve to increase foreign exchange reserves.
