Imran Govt Eyes People’s Gold To Raise Forex Reserves

The ruling Imran Khan-led Pakistan Tehreek-i-Insaf (PTI) government is considering a proposal to borrow gold biscuits and bars from the people to increase the country’s foreign exchange reserves that remain on a sliding path despite taking over USD 5 billion loans in the past three months from bilateral and multilateral creditors, according to a local media on Sunday.

The proposal has been discussed in the Economic Executive Council (EEC) – the body comprising all Finance Ministers and the State Bank of Pakistan (SBP) governor, The Express Tribune newspaper reported, citing sources in the Ministry of Finance.

According to the proposal, the commercial banks will issue a negotiable discounted instrument to the gold owner and pay an interest rate on the precious metal. The commercial bank will deposit the gold with the SBP that can monetise it to increase the foreign exchange reserves -already largely built by taking expensive foreign loans, the Pakistani newspaper reported.

The central bank already has 2.01 million fine troy ounces of gold reserves valued at USD 3.8 billion, according to the SBP’s reserves position statement of December 31, 2021.

The central bank’s reserves have constantly been on a declining path and further slid to USD 17 billion as of February 11, The Express Tribune newspaper reported citing the SBP statement.

In the past three months, the government took a USD 3 billion loan from Saudi Arabia, raised the most expensive debt of USD 1 billion in Pakistan’s history by pledging motorways and received another USD 1 billion from the International Monetary Fund. But still, the reserves could not be stabilised due to lower exports and higher imports along with growing foreign loans repayments.

The proposal to borrow gold from people against a negotiable instrument had initially been floated by an expatriate, Tahir Mehmood, to Prime Minister Khan. The premier then referred the matter to the EEC that has now fine-tuned it to increase reserves and bring more cash into the market against an idle asset, the Pakistani newspaper reported.

In the last EEC meeting, Finance Minister Shaukat Tarin said that the objective of the gold-based negotiable instruments was to “translate gold into foreign currency to enhance foreign exchange reserves”.

According to some estimates shared with the EEC, people have roughly 5,000 tonnes of gold bars and biscuits. But there were no firm numbers available, The Express Tribune newspaper reported citing the sources.

The EEC also discussed the issue of low tax contributions by the jewellers, directing the FBR to prepare a plan for the collection of due taxes from the gold industry. There are roughly 36,000 jewellers and only over 50 registered for sales tax purposes with the FBR.

Last month, the government slapped a 17 per cent sales tax on the sale of gold and jewellery, the Pakistani newspaper reported. (ANI)