It was reported this week that the State Bank of Pakistan (SBP) has made amendments to its regulations regarding the purchase of foreign currency, binding all exchange companies to ensure that no individual shall buy foreign exchange of more than $10,000 per day and $100,000 per calendar year. These amendments have been introduced to improve documentation and transparency and to further strengthen the foreign exchange regulatory regime.

Given the pace at which the rupee was losing its value, this was an important decision to take. Even though the authorities increased the interest week recently to lower demand, that in and of itself is not sufficient as a measure to bring things under control. It made sense for the SBP to step in considering how substantial amounts of foreign currency was being purchased for speculative gains leading to excessive demand in the open market. Due to this, a large number of people who need foreign currency for reasons such as travel, education, medical needs, etc, are being adversely affected.

This decision has had an immediate calming effect on the currency as well as the rupee gained 50 paisas to end steady at 180 per dollar in the interbank market on Monday. Now that the demand will be curbed to some extent following these measures, we can only hope for some stability in the forex market in the coming days.

Given the severity of the situation, perhaps the authorities could also consider increasing taxation on online and card payments made to international vendors. Of course these are hard decisions, but there are few options at this moment; most of the goods or services under this category would not be considered essential. While the government continues to downplay the inflationary crisis, the fact is that Pakistan does find itself in a relatively exceptional position. The status quo is unsustainable and the disadvantaged among us continue to bear the brunt. Extreme measures are indeed the need of the hour.