The US dollar (USD) on Thursday witnessed a massive loss against the Pakistani rupee (PKR) in the open market.

According to the State Bank of Pakistan, the local unit (USD) lost PKR25 against USD trading at Rs290 in open market.

In an effort to narrow the exchange rate gap between official and kerb markets, the central bank has granted permission to banks to purchase dollars from the interbank market for settling international card payments. This move comes after the International Monetary Fund (IMF) demanded that Pakistan address its currency market issues as a condition for resuming a $6.5 billion bailout program.

Responding to stakeholder feedback, the State Bank of Pakistan (SBP) issued a circular stating that authorized dealers can now buy USD from the interbank market for the settlement of card-based cross-border transactions with international payment schemes such as Visa and MasterCard. These guidelines are effective immediately and will be in place until July 31, 2023.

Previously, banks had to purchase US currency from exchange companies to settle card-based cross-border transactions. However, due to limited foreign currency availability, debit/credit card purchases on international websites and retailers could only be settled by banks purchasing dollars from the open market. The increasing usage and acceptance of digital instruments in Pakistan have made this issue more prominent.

According to the SBP’s quarterly review of payment systems, Pakistan has witnessed a significant rise in the use of digital payment instruments. Of the total cards in circulation, 76.7 percent are debit cards (37.1 million), followed by 19.1 percent social welfare cards (9.2 million), 4 percent credit cards (1.9 million), and 0.2 percent prepaid cards.