The decision to ban the import of the yellow metal for one month with immediate effect. PHOTO: FILE
In an attempt to address steep devaluation of the rupee against the dollar, Pakistan on Tuesday temporarily banned import of gold to save the precious foreign currency reserves.
The Economic Coordination Committee of the Cabinet, headed by Finance Minister Ishaq Dar, took the decision to ban the import of the yellow metal for one month with immediate effect.
During a meeting with Dar in Karachi last week, the Exchange Companies Association of Pakistan (ECAP) had claimed that smuggling of gold to India was causing rupee devaluation, as the importers were mopping up dollars from the market to meet the needs of the Indian buyers.
After the Indian government’s decision to discourage gold import by imposing 8% duties, the buyers had shifted to Pakistan where the commodity was allowed to be imported duty free since 2001.
For encouraging re-export of gold products Pakistan had allowed the duty free import of gold under “Entrustment” and the “Self Consignment” schemes of 2001.
“There have been serious apprehensions that these schemes for duty free import of gold are being abused by some unscrupulous elements and the national interest is being damaged. Instead of being used for its intended purpose, the gold is being smuggled to India,” read an official handout.
According to the ECC decision, the operation of these schemes will remain suspended till end-August and the ban will allow the government sufficient time to re-examine the operation of these schemes with a view to speedily removing any loopholes and deficiencies.
It further stated that the government will again restore these schemes in an improved form so that genuine exporters of gold jewelry are facilitated in the best possible way to contribute to the national objective of increasing exports.
The government has partly addressed the reasons behind this steep devaluation of rupee by banning the gold import. However it has yet to take any action against the exchange companies involved in hoarding of dollars on hope of making big fortunes, according to industry experts.
Published in The Express Tribune, July 31st, 2013.
COMMENTS (14)
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@Ashkenazi: My point was why in the first place did the govt not charge any duty on imports of gold?
@Ashkenazi: That doesn't make any sense. What makes sense is that a poor country with dire finances like Pakistan should adequately tax the import of Gold because
The majority of gold imported is used for jewellery etc (little or no industrial use in Pakistan), hence it is a luxury good that only a small fraction of the population has access to. It is only logical that the government tax luxury imports (such as gold) in a poor country where tax revenues are already thin.
If you are smart you keep your gold in a safe country, like Australia. The best way to do this is FirstGold a gold and silver bullion storage facility, The bullion is in your control but out of your governments. No extra fees or costs charged, FirstGold is a secure way to buy gold and silver bullion that is 100% physical and in your hands. Outside of your country so Outside of government interference or manipulation.
Tariff the gold and export to India. it will be smuggled anyways.
@Gringott: Because gold is money that banker can't print and create inflation.
Prelude to seizure of all gold from public.
Why ban on the import? Shouldn't the export be banned to counter rupee devaluation?
Why of all the things that this poor country imports, was gold given a duty free status?
I think the directive came from Bank of International Settlements (The Central bank of Central banks). While other central banks are amassing gold for coming financial crash (correction if you are analyst), they are saying common people shouldn't convert worthless paper into gold and silver citing ludacris reasons.
A nation cannot live in luxury when faced by economic hardship. Beside gold all other luxury items needs to be looked into n banned such as: cars over 1300cc, makeup items, RBD/olin (palm oil finished goods) local importers needs to be advised to import CPO/build down stream refineries in Pakistan to produce RBD/olin n get free from waste fatty acid n sterin, reduction in tea imports, pan/it's related ingredients and other items. If China can do n pay off all it's loan to Russia, what's wrong with us.
O.K., the one thing that stands out in this story is that the Pakistani government is colluding with the Indian government to impoverish gold traders. Exactly how is "the national interest being damaged"?
Signs of desperation.
Actually the exchange companies found it very convenient to blame gold smugglers. They've been openly violating SBP regulations and buying and selling at spreads far greater than the mandated 25 paisa. The situation is such that their currency boards tell you one selling rate and their counter clerks another higher rate.
Anyway this is what happens when the IMF openly demands a 5-10% devaluation and the govt. dilly dallies. The govt. should have just done an orderly devaluation instead of letting things get away from it like this.