What are FX Settlement Costs?

We've had to incorporate FX Settlement Costs due to the current economic conditions, and their impact on the FX rate. These are costs and variances incurred while buying foreign exchange from the open market through our FX dealer bank to settle international card transactions. As per State Bank guidelines, financial institutions are required to settle their foreign scheme obligations through open market purchases of foreign currency. This rate can be substantially higher than the interbank rate. 

When you purchase something from a foreign merchant such as Netflix, Spotify, PUBG etc., although it's denominated in PKR, it's still an international transaction that is settled in foreign currency. Hence, FX Settlement Costs also apply to international transactions denominated in PKR.