Government eyes people’s gold to boost forex reserves

Government eyes people's gold to boost forex reserves

ISLAMABAD: The government is considering a proposal to borrow gold biscuits and bars from the people to increase foreign exchange reserves that remain on a sliding path despite taking over $5 billion loans in the past three months from bilateral and multilateral creditors. 

The proposal has been discussed in the Economic Executive Council (ECC), the body compromising all economic ministers and the State of Bank of Pakistan (SBP) governor, as per reports of 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 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.

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It should be noted that the central bank’s reserves have constantly been on a declining path and further slid to USD 17 billion as of February 11, according to 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 motorway and received another USD 1 billion from the International Monetary Fund (IMF).

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However, still the reserves could not be stabilized 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 Imran Khan. The premier then referred the matter to the ECC that has now fine-tuned it to increase reserves and bring more cash into the market against an idle asset.

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