Pakistan's Gold Reserves: 6 Key in A Glimmer of Hope

Gold has always been an important asset to the countries around the world and considered a store of value. For countries such as Pakistan, gold assets serve not only as a more effective form of saving, but also as an outpost of fostering greater financial stability in the country in the long run. The real question to ask, however, is what role does gold play in the economy of Pakistan today as well as to be played in the future if any.

This article will further elaborate on the current state of Pakistan’s gold assets, its changes over time, its determinants and its possible as well as probable effects in furthering the economy of Pakistan post its analysis.

Current State of Pakistan’s Gold Reserves

Current State of Gold Reserves in Pakistan The gold reserves of Pakistan are currently valued to be between fifty to sixty tons, this of course is little compared to other developed super nations that exist but it does play an important role when looking at its foreign exchange reserves it has. Gold unfortunately is placed as a sub group when looking at the overall amalgam of great assets Pakistan possesses.

In the past, Pakistan has faced balance of payments issues, constant shifting exchange rates, and the necessity of importing most of its goods. This puts the country at risk from international trades which usually results them in having to take loans from global organizations like IMF. In situations such as these, gold plays an important role as it helps against loss of foreign exchange reserves and slide in currency depreciation.

The Role of Gold in Pakistan’s Economy

In case of devaluation or inflation, it is possible that the national currency depreciates, that is why gold, specifically for Pakistan, is a great asset. In the past, Pakistan along with many other countries have faced high inflation along with unstable exchange rates, in that regard gold is a great asset that helps mitigate harsh financial conditions. As a reserve asset, the country’s small gold holdings may actively counter market turbulence and subsequently restore investor confidence.

Pakistan’s Challenges in Gold Accumulation

While countries have many benefits from possessing gold reserves, Pakistan unfortunately has its own issues with acquiring more gold that include:

Economic Instability: Due to the excessive debt burden along with inflation and trade deficits, the purchasing capacity of Pakistan is typically low. As Pakistan faces multiple underlying problems such as energy crises, poverty and external debts, purchasing gold is often not an economic priority.
Import Dependence: Because essential goods such as oil are heavily imported, the shortage of foreign exchange further prolongs the situation. This in turn results in Pakistan’s central bank being unable to devote resources and funds to increasing gold reserves. A lack of sufficient export makes it even harder for Pakistan to buy gold since it needs US Dollars to do so.
Geopolitical Uncertainty: Political and economic uncertainty in the country combined with regional tensions at times results in insufficient foreign investments in Pakistan preventing the country from being in a strong position which further limits buying power. Due to this uncertainty, the efforts to acquire gold reserves get hindered over time.
Global Gold Prices: The above mentioned point of US Dollar requirement to that gold comes at a price which is subject to inflating market causes gold to be hard to use as a reserve for countries over inflation rates are high. Even if the gold rate is low the market is still hard to time for buying gold as it is a piecemeal asset.

How Pakistan Can Increase Its Gold Reserves

Pakistan has a current limit of gold reserves, however, it can implement a number of factors in order to improve this value and try to take a better stance on the international financial market on the whole:

Boosting Domestic Gold Mining: Balochistan and Khyber Pakhtunkhwa regions in Pakistan are rich in gold mines which have barely been used properly. Promoting local mining companies capital investments in these sectors could potentially allow Pakistan to produce their own gold. This would ensure an increase in gold reserves and would lessen the total amount of gold imported by the country. Not only would local investment be targeted, but international investment for mining infrastructure would better enable the shift.
Enhancing Foreign Exchange Earnings: Investing in the expansion of exports in Pakistan, especially the agriculture and textiles industries could significantly increase forex reserves. These increased earnings could be partially utilized to buy gold and further increase the national reserves. Additionally, this leads to creating a more stable forex environment which allows us the diversification of buying gold for long term investments.
Strategic Gold Purchases: The government could look to buy gold at times when globally the value is less. This would allow the reserves of gold to increase while at the same time Pakistan gets to purchase gold at a lower value which benefits economically stable countries in the long run.
Partnerships with Global Institutions: Such bilateral engagements with key gold-producing countries could enable Pakistan to acquire gold on more favorable conditions. In such context, it is also necessary to develop a long-term policy on how to incorporate gold in the strategy of the national financial system.
Promoting Investment in Gold Assets: A third possibility could be to stimulate both foreign and local investors to maintain gold-linked instruments, such as gold bonds or gold-backed exchange-traded funds. This could enhance the gold holdings of the country as an investment and without a funding obligation on the part of the government upfront.

Future Prospects: How Gold Could Impact Pakistan’s Economic Future

In particular, greater ownership of gold by Pakistan can lead to several desirable outcomes for the economy of the country in the near future:

Strengthened Currency and Financial Stability: Pakistan will be able to be more secure regarding the value of its own currency, Pakistan Rupee, in the global market once its gold reserve is on the increase. More currency supporting by gold means that there will be more foreign direct investments since investors would consider it more secure to be in a country with large reserves of gold.
Improved Global Credibility: According to international markets and credit ratings agencies, Pakistan would be able to enhance its perception in the international arena by increasing its stock of gold reserves, which would in turn lead to improved trade relations and reduced borrowing costs for the country.
Economic Diversification: Moreover, a larger gold reserve can enhance the economic base of this country. With an increased amount of gold wealth, the resalable cite country can diversify its investment in various fields including technology and infrastructure which would improve the country’s future economy.
Buffer Against External Shocks: A rise in currency reserves would protect Pakistan from external shocks such as higher global oil prices or a decline in foreign remittances. This would allow them to avoid borrowing when faced with economic hurdles such as inflation.

Conclusion: Gold as a Potential Pillar for Pakistan’s Economic Growth

Pakistan as a country is endowed with gold reserves that have potential for boosting the country’s economy albeit being slightly small on a global scale. This emphasis of investing in local mining as well as procurement of gold on a strategic level if adequately planned for can put Pakistan in a better global financial positioning. Given the amount of the external and internal hurdles Pakistan is faced with, gold can easily aid the country in strengthening its economy, expanding the investors’ trust and creating the path for the long term overall growth of the country.

It can therefore be asserted that gold has the potential of turning Pakistan’s economic fate if only the country thoroughly focuses on augmenting its reserves as well as fixing the intricate structural challenges that hamper the economy.