INTERVIEW WITH MALIK BOSTAN, CHAIRMAN EXCHANGE COMPANIES ASSOCIATION OF PAKISTAN
SBP SHOULD ISSUE LICENSES TO HAWALA OPERATORS.
Jan 2 - 8, 2012
Malik Bostan is one of the pioneers to start currency exchange business in Pakistan. He was born on April 08, 1954 in Chakwal. He completed his intermediate from Chakwal College in 1973. His family moved to Karachi in 1977 for better prospects. In December 1994, he incorporated his own money changing company called Bostan International, which was merged with Pakistan Currency Company in June 2003. Since then, he has been serving as its Chairman.
PAGE: WHAT ARE YOUR COMMENTS ON RECENT DEPRECIATION OF RUPEE?
MALIK BOSTAN: We have to look at things from a positive perspective. No doubt, the rupee fell to a record low against US dollar recently mainly due to shaky Pak-US ties, but at the same time our remittances are at an all time high and exports have surged in spite of unprecedented economic challenges. These are positive economic developments and will help establish the exchange rate in future. Besides as long as dollar demand is high, so will be its rate and vice versa. It is a floating exchange rate after all. The Pakistani rupee hit a record low for the fifth consecutive day in the first week of December 2011 due to increased import payments, the country's economic outlook, and weakness in regional currencies.
The rupee lost 3.83 per cent in the year 2011. In part, the Pakistani rupee's fall reflects pressure most regional currencies are facing as worries about Europe's debt crisis and the global economy drive investors out of riskier assets.
The Indian rupee lost 6.7 per cent in last November, before rallying after the world's six major central banks initiated coordinated action to help ease a cash crunch stemming from the mounting Euro zone crisis.
Investors are also concerned with Pakistan's current account deficit, which swelled to $1.6 billion in July-Oct 2011. The current account deficit stood at $2.104 billion in July-Nov compared with $589 million in the same period a year earlier.
The deficit might widen further in coming months because of debt repayments and a lack of external aid. Pakistan has to begin repayments on an $8 billion IMF loan in early 2012, and without additional sources of revenue, its foreign exchange reserves may come under pressure. It has to make a repayment of more than $1.1 billion in the second half of 2011/12. Foreign exchange reserves were at $16.69 billion in the week ending Dec. 9, compared with a record $18.31 billion as of July 30.
The relations between Pakistan and the United States are also worrisome following a cross-border attack by Nato that killed 24 of the country's soldiers. US and Pakistani relations affect the rupee because Washington has influence with international lending agencies. The rupee inched closer to its record low in the last week of December on increased payments for imports, and it is expected that the pressure might continue because of a widening current account deficit. The rupee hit a record low of 90.03. Earlier, since the government had allowed people to buy dollars or Saudi riyals from the open market for Haj, the demand rose sharply pushing up prices. Prior to that the government was used to provide $1,000 to each intending Haj pilgrim. Malik Bostan said if the country fails to mend its relation with US and the IMF, it will have to face negative response from other lending agencies. Pakistan would have to rely on remittances and export proceeds for foreign exchange reserves.
PAGE: WHAT ARE THE MAJOR ISSUES FACING EXCHANGE COMPANIES IN PAKISTAN?
MALIK BOSTAN: The foremost issue is that the State Bank of Pakistan should provide a level playing field to exchange companies. The finance ministry pays 25 Saudi Riyal rebate on each $100 remittance to banks whereas exchange companies get absolutely nothing. This is despite the fact that exchange companies have fifty percent share in home remittances and during the last fiscal year, we brought about $4.5 billion to the national exchequer. Secondly, we should be granted license to do business with foreign money transfer companies to further boost the remittances level and surpass the set target of $1.75 billion per month.
Currency exchange business in Pakistan has an enormous potential only if the leadership takes concerted efforts to address the core challenges faced by exchange companies.
PAGE: YOUR OPINION ABOUT THE HAWALA REMITTANCE SYSTEM?
MALIK BOSTAN: The main reason why people prefer Hawala to the legal banking system for transferring remittances is to avoid paying high taxes and banking fees and not go through complicated banking procedures. This system has been legalized in Dubai, so why not in Pakistan? I am all for it. SBP should issue licence to Hawala operators in the country so that the business operates within a legal framework.
PAGE: WHAT IS YOUR TAKE ON BILATERAL CURRENCY SWAP AGREEMENTS?
MALIK BOSTAN: The signing of a currency swap agreement (CSA) between Pakistan and China recently has slightly improved sentiment. The agreement would promote trade between the two countries and also further strengthen their economic ties. The total value of bilateral agreement with China in terms of dollar amounted to $3.142 billion. In November, Pakistan and Turkey also signed a currency swap agreement. The bilateral CSA has been concluded in Pakistan Rupee/Turkish Lira with size amounting to one billion dollar in equivalent local currencies. I think it is a good move.