ISLAMABAD: Pakistan’s increasing gold exports are likely to take a hit due to a ban on the import and export of precious metals introduced amid last week’s military standoff with India, analysts said on Wednesday.
On May 6, the government enforced a 60-day ban on the import and export of precious metals, jewelry and gemstones to stabilize its foreign exchange reserves, just one day before India attacked Pakistan.
The deadly escalation followed an attack in Indian-administered Kashmir on April 22 that killed 26 tourists, which New Delhi blamed on Pakistan despite Islamabad’s denial of any involvement.
Nearly two weeks after the incident, the nuclear-armed neighbors exchanged ballistic missiles and artillery fire after India targeted what it called “terrorist infrastructure” inside Pakistan.
Gold remains a traditional store of value in the country, which primarily sources its imports of the metal from the United Arab Emirates, Switzerland, Turkiye and other major gold-trading global centers.
“This ban is expected to be lifted,” Ahsan Mehanti, the Chief Executive Officer at Arif Habib Commodities Ltd, told Arab News. “However, it is negatively impacting the country’s gold exports that were increasing to a record level.”
According to the Pakistan Bureau of Statistics, the country’s jewelry exports rose by 58 percent to Rs3 billion ($11 million) in March this year, matching the total for the entire previous year.
“This 58 percent surge is a record,” Mehanti said, adding the ban will have a short-term impact on gold exports this year, which are bound to increase later when the ban is lifted in July.
“The ban was imposed when the [Pakistan-India] border tensions started intensifying,” he continued. “This military escalation could have led to an increase in the circulation and prices of gold in Pakistan, but no such thing happened because of the government’s ban.”
He maintained the ban helped the gold market avoid speculative trading that kept the prices in check.
Mehanti said since international gold prices have declined on the back of the US-China trade war’s settlement, “we expect the surge [in Pakistan’s gold exports] to be higher than the previous record surge of 58 percent.”
Pakistan’s Dawn newspaper reported on May 8 the export curb aimed to limit the flow of gold and other precious metals to India via Dubai, citing unnamed government officials.
It added the ban was also intended to restrict the outflow of dollars from the cash-strapped country, which has spent over $28 million on importing 368 kilograms of gold so far this year.
However, the commerce ministry spokesperson, Muhammad Ashraf, denied the ban had any “relevance to the Pak-India conflict.”
A member of the managing board of Karachi Sarafa & Jewellers Group, M. Iqbal, said Pakistan’s gold market was linked to the international gold market, which is mainly driven by the dollar.
“Gold would take a hit when the United States faces an issue like what we saw during the US-China tariffs war,” he explained.
The cash-strapped country also exported $4.1 million worth of gems in the first nine months of FY25 ending in June.
Prime Minister Shehbaz Sharif’s administration is relying mainly on the International Monetary Fund’s (IMF) $7 billion loan program to keep debt-ridden Pakistan’s balance of payments in check, as exports have grown only six percent this year while foreign direct investment has remained stagnant for decades.
The government has incentivized jewelry exporters through duty drawbacks and zero-rating for specific inputs, which helped the country’s jewelry exports rise 43 percent last year.
Gold prices in Pakistan hit a record high late last month but have been declining since the US and China resolved their trade tariff dispute.
On Tuesday, 12 grams of the yellow metal were priced at $1,222 (Rs344,200).
In 2023, Pakistan relaxed several gold import regulations to promote transparency, minimize smuggling and establish computerized customs valuation and tracking systems.
