In recent years, Pakistan has experienced economic challenges and uncertainties caused by volatile exchange rates and fluctuations in gold prices. To address these issues and promote stability and growth, the government must implement a modern foreign exchange regulation and a gold policy. These measures will not only benefit the government but also the business community as a whole by providing a conducive environment for investment and trade.
One of the primary reasons for the urgency of reforms and modern foreign exchange regulation in Pakistan is to tackle the volatility in exchange rates. Fluctuations in exchange rates can impact the cost of imports and exports, leading to uncertainty for businesses and investors. By having a robust foreign exchange regulation framework in place, the government can control and stabilise exchange rates, thereby creating a more predictable and conducive environment for trade and investment.
Effective foreign exchange regulation can also help prevent currency manipulation and illicit financial activities. By monitoring and regulating foreign exchange transactions, the government can combat money laundering, tax evasion, and other financial crimes that undermine the country's economic integrity. This will improve transparency and accountability in the financial system, fostering trust and confidence among investors and businesses.
In addition to foreign exchange regulation, the implementation of a gold policy is essential for Pakistan to manage its gold reserves effectively. Gold is a valuable asset that plays a significant role in the global economy, and having a clear policy on gold ownership, trading, and reserves can bring numerous benefits to the country.
A gold policy can help stabilise gold prices and prevent manipulation in the market, thereby safeguarding the value of Pakistan's gold reserves. This stability can attract investors and increase confidence in the country's financial system. A well-defined gold policy can also enhance the credibility of Pakistan's monetary policy, signalling a commitment to sound economic principles and responsible governance.
The implementation of modern foreign exchange regulation and a gold policy will yield numerous benefits for both the government and the business community. For the government, these measures will strengthen macroeconomic stability, attract foreign investment, and improve fiscal management. By ensuring transparency and accountability in financial transactions, the government can boost revenue collection and enhance economic growth.
Similarly, the business community will benefit from a more stable and predictable economic environment. Clear regulations on foreign exchange and gold trading will reduce business risks and uncertainties, encouraging transparent domestic and foreign investment. Moreover, a gold policy can provide businesses with an additional avenue for wealth management and diversification, contributing to financial resilience and sustainability.
When it comes to the gems and jewellery sector, such reforms are a prerequisite. Without a clear and modern gold policy, there is a lack of regulation in the gold industry. This can lead to issues such as inconsistent purity standards for gold, making it difficult for consumers to trust the quality of the jewellery they are purchasing.
A modern gold policy could provide guidelines for lending institutions to offer financing options to jewellery businesses. Without proper regulations in place, jewellery businesses may struggle to access the necessary financing to operate and expand their businesses.
A modern gold policy could attract foreign investment in the gold and jewellery sector. Without clear regulations and policies, investors may be hesitant to invest in the industry, leading to a lack of capital for growth and development.
A modern gold policy will lead to transparency in the gold supply chain, reducing the risk of illegal activities such as smuggling and money laundering. Without proper regulations, the industry may be vulnerable to such activities, further damaging its reputation.
Without proper forex regulations, fluctuations in exchange rates can impact the cost of importing raw materials for jewellery making. Profits will also be impacted and this ultimately has led to the current situation, in which the exports are overwhelmingly undervalued and profits are in their majority not repatriated. Unfortunately, many members of the trade prefer to trade and even manufacture from a third country.
In the absence of modern forex regulations, businesses may face challenges in accessing foreign currencies needed for international transactions, such as purchasing gemstones from other countries or participating in global trade fairs. Furthermore, this situation makes it impossible for the jewellery industry to provide the required after-sales services that international trade demands.
Without clear guidelines and regulations governing foreign exchange transactions, businesses in the jewellery and gemstone industry may face uncertainty in their trade practices, leading to potential legal and financial risks.
The absence of a modern forex regulation framework can deter potential investors from entering the industry, as they may perceive higher risks and uncertainty related to currency exchange and international transactions.
Overall, a lack of modern forex regulations in Pakistan can hinder the growth and development of the jewellery and gemstone industry, limiting its ability to compete effectively in the international market and realise its full potential.
The absence of a modern gold policy and a modern foreign exchange regulation in Pakistan hurt the jewellery industry by undermining trust among consumers, limiting financing opportunities, reducing investment potential, and creating transparency issues.
The government needs to consider developing and implementing an updated gold policy to support the growth and stability of the jewellery sector.
By implementing effective regulations and policies in these areas, the government can foster a favourable environment for investment and trade, benefiting both the government and the business community. Pakistan must prioritise these reforms to secure a prosperous and sustainable future.
The writer has served as a member of the Prime Minister’s Task Force for Gems and Jewelry. He can be reached at: barnabyplowrightgmail.com