Open Market Currency Rates in Pakistan
Understanding currency rates in Pakistan is not just for the elites and bankers—it's for every person with a family member abroad or who needs to pay for an imported mobile phone. It’s like a secret code: once you crack it, you stop losing money. We are going to share about this complex system that’s constantly buzzing in the news.
The Two Worlds of Exchange: Interbank vs. Open Market
The biggest confusion for anyone trying to convert currency is why the rate you see on a news ticker is never the rate you actually get at the money changer. It comes down to two markets:
The Interbank Rate (The Wholesale Price):
This is the official benchmark rate set by the State Bank of Pakistan (SBP). Think of it as the 'cost price' for foreign currency. Banks use this rate for huge transactions—like government debt payments or major import/export deals. When you hear the SBP talk about a rate, they mean the Interbank rate.
The Open Market Rate (The Retail Price):
This is the rate your local exchange company or commercial bank branch gives you for physical cash, like when you’re traveling or receiving small remittances. Why is it different? Because this rate includes the exchange company's profit margin, their running costs, and a premium for the immediate physical availability of the dollars or Dirhams. This gap between the Interbank and Open Market rates is your pocket’s most important indicator. A wide gap means uncertainty; a tight gap means the market is stable.
In Pakistan, you can exchange money as follows:
- Pakistan Currency Exchange Company (Pvt.) Ltd.
- NBP Exchange Company Ltd.
- HBL Currency Exchange (Pvt.) Ltd.
- AA Exchange Company (Pvt.) Ltd.
- Al-Rahim Exchange Company(Pvt.) Ltd.
- D.D Exchange Company (Pvt.) Ltd.
- Al-Hameed Int’l. Money Ex (Pvt.) Ltd.
- Al-Sahara Exchange Company (Pvt.) Ltd.
- Dollar East Exchange Company (Pvt.) Ltd.
- Fairdeal Exchange Company (Pvt.) Ltd.
- Money Link Exchange Company (Pvt.) Ltd.
- Glaxy Exchange Company (Pvt.) Ltd.
Why the Dollar Rate Changes in Pakistan
We always thought the State Bank of Pakistan (SBP) just set the rate, but that’s no longer true. The rate is mostly decided by demand vs. supply in the market.
- Demand: This is for things like imported oil, machinery for factories, or paying off old foreign loans. If demand is high, the PKR gets weaker (Rupee falls).
- Supply: This is where the magic happens! The money coming in from exports, foreign investment, and, most importantly, your relatives sending money home (remittances). If supply is high, the PKR gets stronger (Rupee rises).
Right now, in late 2025, the PKR trading at around 280-283 against the USD. This stability is a direct result of the SBP pushing for a purely market-driven system post-IMF reforms, but the real credit goes to one single source of money.
Our Lifeline: The Billions Sent by Our Overseas Family
This is the most crucial takeaway. Our cousins and family abroad are the backbone of this stability. Did you know remittances hit a projected $35-36 Billion in FY25? That is a HUGE cushion!
It is the influx of foreign money, mostly US Dollars (USD), Saudi Riyal (SAR), and UAE Dirham (AED), that makes the Supply side robust. When they remit one thousand dollars, that one thousand dollars gets into the market, and it adds to the overall supply, and that is why the Rupee does not crash.
- Gulf Money (AED & SAR): It is the largest and most stable stream. Monthly combined injections of more than 1.3 billion by our brothers in Dubai and Riyadh are the granite foundation of our forex reserves (which is now a nutritious $19.59 billion total).
- Western Currencies (USD, EUR, GBP): These are US, UK, and European funds that are high-value and contribute to diversification of our reserves and therefore, the financial system becomes strong.
The Big Secret: Why the SBP is Happy Now
The SBP's goal isn't just a stable rate, it's making sure that money comes through legal channels. This is why you see them cracking down on the black market and offering incentives for digital transfers. When formal channels are used, the foreign currency goes directly into the national reserve pool, strengthening our position. This 2025 stability (PKR holding steady around 280/USD) is a signal that their reforms are actually working!
FAQ:
How does inflation in Pakistan affect currency rates in Pakistan?
The buying power of the Rupee is undermined by inflation in the local and global markets. The high domestic inflation implies that the imports will cost more, and this will require more foreign currency (USD) to purchase the imports, which leads to further depreciation of the PKR against other currencies.
Why are the Open Market currency rates in Pakistan often higher than Interbank?
The Open Market is for retail transactions (physical cash). The rate is higher because exchange companies add their operational costs and a profit margin. The difference also acts as a premium that reflects the immediate demand and supply of physical cash in the street, especially during times of high uncertainty.
What role does the SBP Interest Rate play in determining currency rates in Pakistan?
The SBP's policy interest rate (e.g., around 11.00% in late 2025) attracts foreign investors looking for higher returns. When the rate is higher, it encourages foreign capital inflows (hot money), which increases the demand for the PKR, thus potentially strengthening the local currency.
Is a weaker PKR (depreciation) always bad for the Pakistani economy?
Not entirely. While a weaker PKR causes imported inflation, it also makes Pakistani exports cheaper for international buyers, which can boost our exports and theoretically help reduce the country’s trade deficit. The key is stability, not just strength.