Dollar Sales in Pakistan Drop 50% as Grey Market Resurfaces

Dollar Sales by Money Changers Drop 50pc Amid Grey Market Resurgence in Pakistan

KARACHI: Currency dealers have reported a sharp decline in dollar sales by exchange companies this month, with transactions falling nearly 50 percent compared to last year. The drop comes as concerns mount over the revival of the grey market, where buyers are offering higher rates than the official open market.

According to market insiders, remittance inflows remain steady, recording $3.2 billion in July 2025. However, the decline in open market activity is raising fears of renewed exchange rate volatility. Bankers revealed that money changers sold around $115 million to the banking sector this month—far below the $300m recorded in July FY26 and well under the $350m monthly average seen during FY25.

Strict Rules Limit Dollar Transactions
Money changers said tighter documentation requirements have restricted their ability to sell dollars. Currently, only small transactions of up to $500 escape scrutiny, discouraging larger sales. “The market is running short on dollars. We are only selling what comes in from the public. It looks like someone is purchasing dollars before they reach us,” explained a dealer on condition of anonymity.

Even if sales recover, money changers estimate total August transactions are unlikely to exceed $200m—still far below normal monthly volumes.

Grey Market Pulls Buyers with Higher Rates
Industry insiders warn that illegal dollar markets are regaining strength in major cities. Rates in these informal markets range between Rs287 and Rs292, drawing both individual sellers and buyers who need foreign currency for tuition fees, healthcare, or travel. Despite offering higher prices than the open market, availability of dollars remains limited.

Meanwhile, the official dollar rate in Pakistan has eased slightly due to the government’s crackdown on smugglers and unauthorized operators. Since July 22, the rupee has strengthened by Rs4 in the open market, pushing the dollar down from Rs288.50 to Rs284.50.

Experts Call for Liquidity and Market Confidence
Bankers stress that the current decline in open market sales is not linked to government incentives for banks or money changers. Instead, they blame artificial price controls, which have created space for illegal operators to manipulate demand by offering more attractive rates.

Analysts believe that sustained foreign exchange reserves, stable remittance inflows, and stronger economic ties with the US and China could help restore stability in the currency market. They also advised the State Bank of Pakistan to avoid large-scale dollar purchases, as seen in FY25, to maintain liquidity and prevent market shortages.

Despite ongoing crackdowns, volatility persists in both the open and interbank markets, leaving the future of the rupee-dollar parity uncertain.