A prominent business leader today issued a stark warning that the State Bank of Pakistan’s practice of purchasing dollars from the domestic market is a key driver of inflation and economic uncertainty, urging an immediate halt to the policy.
In a statement released on Friday, Shahid Rasheed Butt, a former president of the Islamabad Chamber of Commerce, contended that this strategy creates artificial shortages of foreign currency and distorts the economy.
He highlighted that the central bank has acquired approximately $24 billion from the local market over the last three years, a trend he characterised as worrying for the nation”s economic health.
Butt argued that foreign exchange reserves should be fortified through sustainable channels like exports, remittances from expatriates, and foreign investment, which provide genuine external stability.
The business leader explained that the central bank’s acquisitions diminish the availability of dollars in the market, exerting downward pressure on the Pakistani rupee and creating significant hurdles for importers.
As the supply of foreign currency tightens, import costs escalate, a rise that is inevitably passed on to consumers through higher prices for goods and services, directly fuelling inflation.
He warned that this places an additional financial burden on households and enterprises already grappling with high energy prices and rising living expenses.
According to Butt, the persistent need for the central bank to intervene in the local market suggests the country’s external earnings from exports and investment have not yet reached a level sufficient to ensure stability.
He emphasised that economic policymaking must pivot from short-term financial balancing measures to a focus on deep, long-term structural reforms.
Pakistan, he asserted, needs to adopt an export-oriented growth strategy by promoting value-added industries and ensuring exporters have access to reliable and affordable energy supplies.
Butt concluded that simplifying the tax system, improving the overall business environment, restricting non-essential imports, and encouraging local substitutes would collectively reduce pressure on the current account and support the country”s external sector.