Pakistan Government Looking to Borrow Citizens’ Gold in Effort to Boost Forex Reserves
The government of Pakistan is mulling borrowing gold from its citizens in exchange for a premium, as the country looks for ways to increase foreign exchange reserves.
According to the Express Tribune newspaper, which cited people from Pakistan’s Ministry of Finance familiar with the matter, the Economic Executive Council (EEC)— which is comprised of the central bank’s governor and all economic ministers— is proposing to borrow gold bars and biscuits from ordinary citizens in order to boost forex reserves. As per the proposal, Pakistan’s commercial banks will offer a negotiable discounted instrument to the gold holder, who will then receive interest on the precious metal.
The gold will be held at the State Bank of Pakistan, which can then be translated into foreign currency. At the end of December 2021, the central bank already held about 2.01 million fine troy ounces of gold, which has a value of approximately US$3.8 billion. However, the bank’s reserves have been rapidly declining as of recent, after the country took on a substantial US$3 billion loan from Saudi Arabia, as well as accepted $1 billion from the IMF. To make matters worse, Pakistan’s economy has also been plagued with a trade deficit.
The EEC still has to determine the interest rate that will be paid to the gold holders, as well as whether or not an amnesty will be issued on the gold assets. According to estimates cited by the council, Pakistanis hold approximately 5,000 tonnes of gold bars and biscuits.
Information for this briefing was found via the Express Tribune. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
