(Bloomberg) -- Pakistan’s central bank Wednesday asked lenders to establish wholly-owned foreign exchange companies to consolidate the market and bring transparency and competitiveness, a key structural reform that may help the country comply with the International Monetary Fund’s conditions for a bailout.

The central bank wants existing exchange companies and franchisees to be transformed into a single category with a well-defined mandate. The exchange companies have been asked to increase their minimum capital requirement by two-and-a-half-times to 500 million rupees ($1.6 million) by December.

The move is expected to help the South Asian nation narrow down the gap between interbank and open market rupee rates to 1.25%, a condition the IMF has set under its $3 billion loan program.

“This is expected to strengthen governance, internal controls, and compliance culture in the sector,” the State Bank of Pakistan said in statement.

The development comes days after the caretaker government of Prime Minster Anwaar-ul-Haq Kakar started a crackdown against illegal currency dealers, hoarders and smugglers of dollars. On Sunday, Pakistan’s powerful army chief Asim Munir met businessmen and pledged to clampdown on the smuggling of dollars and its speculative trade, according to local media. 

On Wednesday, the rupee rose more than 3% to 310.5 a dollar in open market while the interbank rate closed little changed at 306.98.

Not all are convinced that the reforms are a step forward.

 “My worry is that forex will be regulated now, and we might go back to the failed model of holding the rate down and rationing supply,” said Ali Hasanain, associate professor of economics at Lahore University of Management Sciences. “A sure recipe for inefficiency and corruption.” 

--With assistance from Faseeh Mangi.

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