Islamabad: As the Pakistani Rupee (PKR) goes down steadily against the US dollar, experts and stakeholders in Pakistan point fingers at the powerful grip of the grey market and the “significant interference” by the International Monetary Fund (IMF) in the country's banking and currency sectors, reported Dawn.

According to some of them, it is unprecedented that the IMF allegedly got deeply involved in the country's financial framework where they interacted at granular levels with local exchange companies and banks.

A currency dealer alleged that this heightened engagement originated from the IMF's mistrust towards the government leading the lender to directly ascertain dollar rates from the banking and open markets, Dawn reported.

“The IMF people interact with the exchange companies and bankers in Pakistan at the lowest level, which was never witnessed before,” a senior banker said.

Moreover, a high-ranking official of a private bank spoke on the condition of anonymity and said that the government and the State Bank of Pakistan lost control over the exchange rate.

He further called the situation a 'double-edged sword' which was detrimental to both the rupee and the broader economy.

However, Interim Finance Minister Shamshad Akhtar shared her willingness to remain within the IMF framework and is reportedly preparing for a crackdown on illegal exchange companies, reported Dawn.

Currency dealers said there are at least three types of grey markets — first, individual or firms trading in currency without a licence; two, several exchange firms whose selling price is almost equal to the grey market rate; third, the one operating outside the country.

Additionally, the overseas operators are the most harmful since the dollars do not come into Pakistan and only local currency is provided to the remitters in Pakistan.

Moreover, it is also the reason for declining remittances. The country lost USD 500 million in remittances in July as it fell to USD 2 billion compared to USD 2.5 billion in the same month last year. The country lost over USD 4 billion in remittances in the previous fiscal year.

Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan said, “The government may crack down on illegal operators of currencies and reduce the smuggling [of dollars] to Iran and Afghanistan, but the basic reason for a weakening rupee will keep the exchange rate in trouble."

Apart from the grey market and the IMF, many experts also pointed the issue to the political and economic stability as substantial contributors to a vulnerable exchange rate, particularly after the caretaker set-up came into power, as per Dawn.

“The word ‘interim’ amplifies the already existing uncertainties. This government would lose more than what we have lost during the previous government,” said Amir Aziz, an exporter of finished textile products.

Tresmark CEO Faisal Mamsa said, “The interim government trying to overstep its perceived capacity, which is sending a conflicting message to markets.”