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.