Gold is generally considered a luxury commodity in Pakistan. However, in a broader perspective, it is a strategic asset for any country that not only gives protection in times of financial turmoil but also provides a hedge against inflation. In essence, Gold should be recognized as a universal currency, a strategic asset and all efforts should be made to document trading of this important commodity. In other words, just as foreign currency reserves are handled meticulously with the utmost caution, Gold should also get the same importance.
At present, no proper documentation is available with regards to the current gold holdings in the country. Similarly, import and export figures are either not available or cannot be authenticated, where available.
Being the only multi-commodity futures exchange in the country, PMEX is capable of playing a significant role in regularizing the trading of Gold and ensuring its availability at the retail level. Against this backdrop, PMEX held discussions with the Task Force on Gem and Jewellery. This Task Force has been constituted by Prime Minister to come up with policy guidelines in consultation with the relevant stakeholders.
During the discussions with the PM’s Task Force on Gem and Jewellery, PMEX explained its proposed mechanism and the role it can play in documenting gold trading. Following are some of the salient points of the mechanism/proposal:
- The Gold import to be restricted to PMEX TRE Certificate Holders only
- Importer to be allowed to sell Gold at PMEX. This will encourage to sale/purchase of Gold at a regulated platform
- The central bank should devise a procedure enabling the importers to remit foreign exchange outside of Pakistan through formal banking channels
- Government charges/taxes should be reduced to make the import of gold through official channels viable
Further, the Exchange highlighted to the Task Force that managing trade of this strategically important precious metal would lead to myriad benefits. First and foremost, it will help in widening the tax net. The added advantage will be the creation of a trail for the movement of Gold and cash. Secondly, investors will get 100% genuine product. It will become readily acceptable collateral for lending by financial institutions. Lastly, it will help in the creation of full-fledged Gold-backed investment industry.
PMEX is confident that prudent management of the gold trade would go a long way in improving the financial standing and creditworthiness of Pakistan.