The Senate Standing Committee on Economic Affairs has called for stricter actions against banks found guilty of currency manipulation during 2022. In a meeting held earlier today, the committee expressed concern over the profits made by commercial banks through the manipulation of US dollar rates and recommended further punitive measures.
The committee, chaired by Senator Saifullah Abro, demanded a detailed report within two weeks and instructed relevant chambers to attend the next session. The focus of this upcoming session will be on the opening of expensive Letters of Credit (LCs) for US dollars, a practice that allowed commercial banks to profit excessively during the currency crisis of 2022.
According to the committee, commercial banks earned Rs. 65 billion by selling US dollars at highly inflated rates during the crisis. Senator Abro emphasized that this profit should be recovered as it belongs to the people of Pakistan. He criticized the existing penalties imposed on the banks, stating that they were insufficient in comparison to the substantial profits made through manipulation.
Officials from the State Bank of Pakistan (SBP) informed the committee that banks involved in currency manipulation had been fined Rs. 1.4 billion. However, several committee members expressed dissatisfaction with the penalty, pointing out that it was only a small fraction of the Rs. 65 billion profit generated by these banks. One committee member voiced frustration, arguing that such a minimal fine would not serve as an effective deterrent to prevent future manipulation.
In response, the committee directed the Ministry of Economic Affairs to ensure the recovery of these funds from the commercial banks. It also called for the SBP to provide a more comprehensive report on the matter, detailing the actions taken against the banks and the steps needed to recover the manipulated profits.
The issue of currency manipulation first came to light in 2022 when Pakistan faced a severe economic crisis, leading to sharp fluctuations in the value of the Pakistani rupee against the US dollar. As the currency’s value plummeted, commercial banks allegedly took advantage of the situation, inflating exchange rates and profiting from the country’s financial instability.
The fine of Rs. 1.4 billion, which was initially imposed by the SBP, was intended to penalize the banks for their involvement in the manipulation. However, critics argue that the penalty was disproportionately low compared to the scale of the profits made by the banks during the crisis. The committee believes that more stringent punishments are necessary to hold these financial institutions accountable and to discourage similar behavior in the future.
In addition to seeking higher penalties, the committee also discussed the broader implications of the currency manipulation scandal. Members highlighted how the inflated rates for US dollars contributed to the economic difficulties faced by ordinary citizens, including higher costs for imported goods and services. By holding the banks accountable and recovering the illicit profits, the committee hopes to provide some relief to the public and restore trust in the financial system.
Moving forward, the Senate Standing Committee on Economic Affairs is expected to closely monitor the SBP’s progress in addressing the issue. The committee has signaled its intention to push for legislative reforms that would allow for more stringent penalties and tighter regulation of the banking sector to prevent future incidents of currency manipulation.
As the investigation continues, the focus will be on ensuring that commercial banks are held responsible for their actions and that the public is compensated for the financial damage caused by the manipulation. The outcome of the committee’s efforts could have far-reaching implications for the banking sector in Pakistan, potentially leading to increased scrutiny and regulation to prevent future currency crises.
The next session of the Senate Standing Committee on Economic Affairs is expected to provide further clarity on the actions being taken against the banks involved and the potential recovery of the Rs. 65 billion in profits. This meeting will also address the issue of high-cost Letters of Credit and the broader impact of the currency manipulation on the economy.