Senate panel urges action against banks over dollar manipulation in 2022

A Senate committee has called for prompt measures against commercial banks accused of manipulating the US dollar exchange rate and issuing overpriced letters of credit (LCs) in 2022, resulting in a profit of Rs65 billion, reported The News.

The Senate Standing Committee on Economic Affairs requested a comprehensive report within two weeks, insisting that representatives from business chambers participate in the next session to discuss the rising costs. This report should cover the LCs released from April to September 2022, detailing the banks involved, the amounts, and the dollar rates at which they were issued. The committee also seeks information on the actions taken by the State Bank of Pakistan (SBP) and the Ministry of Finance regarding these matters.

Senator Saifullah Abro, who chaired the committee, expressed frustration over the Economic Affairs Division (EAD) and the SBP for their continued inability to provide reports on the utilization of International Monetary Fund (IMF) funds, despite requests made since July. “This lack of seriousness towards the parliamentary committee is concerning,” the panel remarked.

SBP official Qadir Bakhsh defended the organization, stating that IMF inflows are intended exclusively to support the country’s balance of payments and do not enter the government’s non-food account no-1, thereby addressing committee concerns. EAD’s joint secretary confirmed that IMF funds are allocated only to cover the SBP’s operational deficits and not for helping the government’s budget.

Senator Abro pointed out former Finance Minister Ishaq Dar’s September 2022 statement admitting that banks had manipulated dollar prices to extract Rs65 billion. “How could he make such claims without input from the SBP?” Abro questioned. “We need to identify which banks exploited businesses and traders, and why no recovery has taken place.”

The SBP official acknowledged that between April and September 2022, as the dollar price rose from Rs218 to Rs240, there was a significant liquidity crisis. He confirmed a collective penalty of Rs1.4 billion imposed on banks for regulatory breaches but the committee deemed this response inadequate.

Senator Kamil Ali Agha criticized the SBP, stating, “They covered their tracks and ignored the issue. They’ve benefited while the SBP remained inactive.” In response, the SBP representative said that a one-time 10 percent tax on banks was introduced by the Federal Board of Revenue in November, although this matter is currently unresolved in court.

Senator Rana Mahmood ul Hassan pointed out that the alleged manipulation persisted for five months during which the SBP took no action. “We want all prominent chambers of commerce and industry representatives to join the next meeting to share their insights,” he added.