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Pakistan government plans to borrow gold from its own citizens to increase forex reserves of the country: Report

The country in the Indian subcontinent has been crippling with debt and unable to maintain its economic reserves.

In a desperate measure to boost forex reserves, Pakistan’s Imran Khan-led government has discussed a proposal in the Economic Executive Council (EEC) – the body comprising all economic ministers and the State Bank of Pakistan (SBP) governor to borrow gold biscuits and bars from the citizens, The Express Tribune newspaper reported, citing sources in the Ministry of Finance.

The foreign exchange reserves of Pakistan are continuously on a downfall despite already taking over USD 5 billion as loans from bilateral and multilateral creditors in the past 3 months, according to a media report in PTI yesterday.

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. But still the reserves could not be stabilised due to lower exports and higher imports along with growing foreign loans repayments.

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.

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.

The proposal to borrow gold from people against a negotiable instrument had initially been floated by an expatriate, Tahir Mehmood, to Prime Minister Khan, who then referred it to the EEC.

According to media reports, the proposal will allow commercial banks to issue a negotiable discounted instrument to the gold owner and pay an interest rate on the precious metal. In return, the banks will deposit the gold with the SBP that can monetise it to increase the foreign exchange reserves.

According to some estimates shared with the EEC, people have roughly 5,000 tonnes of gold bars and biscuits. But there were no firm numbers available, according to the sources.

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