According to recent data, Pakistan is importing significantly more gold than last year. The nation’s imports of the precious metal during the last two months of the recent fiscal year showed a 44.13% increase compared to this time last year. During July and August 2023, Pakistan imported $4.971 million worth of gold, compared to $3.449 million imported last July and August.
This data comes from the Pakistan Bureau of Statistics (PBS) and reveals the 44.13% rise in Pakistan’s gold imports in terms of monetary spending, though the gain is even more significant when calculating the actual amount of gold purchased.
During July and August this year, Pakistan purchased 102 kilograms of gold. During the same period last year, the nation purchased 65 kilograms, representing a 56.33% rise in the quantity of gold purchased.
Pakistan’s gold imports aren’t just rising during recent months either; the trend can be traced annually. Gold imports in August 2022 sat at $2.426 million. In August of this year, the nation imported $2.985 million in gold, reflecting a 23.02% gain on an annual basis.
Pakistan imported 52 kilograms of gold during August 2023, compared to 49 kilos during the same month last year. This difference reflects a 6.12% rise in the amount of gold purchased per month.
When looking at the month-to-month difference, the figures are even more astonishing. Pakistan spent $1.986 million on imports in July 2023, then quickly spiked up spending to $2.426 million in August. This jump displays a 50.30% month-on-month increase in import spending.
In July 2023, Pakistan purchased 50 kilograms of gold compared to the 52 kilos purchased in August, showing a 4% month-on-month rise in the quantity of gold purchased.
So, why is Pakistan buying so much gold?
To start, gold has long been seen as a symbol of power, honor, and wealth in Pakistan, offering cultural significance, binding relationships together, and acting as a glittering powerhouse. Beyond this, however, gold has earned a much more critical place in Pakistan’s economic structure in recent years as the nation’s local currency loses value. With inflation skyrocketing to an average of 8% to 10% per year (though currently over 35%), the U.S. dollar in short supply, and locals seeking alternatives to the rupee, gold became the obvious choice for the nation with a strong affinity for the precious metal.
“The uncertainty surrounding the rupee and the unavailability of dollars is causing people to turn to gold, which has now become the only other acceptable currency after the dollar,” Nasim Beg, the director at Arif Habib Corporation, explained.
Gold has built itself into Pakistan’s economic system, becoming deeply intertwined with everyday life as a basic currency. The longer this goes on, the more Pakistan will require gold to stay afloat. When looking at the climbing inflation figures, the rise in gold imports only makes sense.
“Gold, over the last two years, has become a commodity in which people can hoard money. Instead of keeping 20 crore rupees in cash in my house, if I can’t deposit that money into a bank account since it comes from questionable sources or it is money that I haven’t declared in taxes, gold is a very easy way to park this money,” Raihan Merchant, the CEO of Z2C Limited, explained.
“Imagine the size and volume of that kind of money; it is not easy to store. When I keep it in the form of gold, it becomes convenient and safe to store. So the supply is not just short because demand might be rising but also because many people also hoard gold to park their black money,” Merchant continued.
As Pakistan’s economy quickly heads toward default, gold will only become more necessary. The nation continues to borrow funds that it cannot pay back. The more this occurs, the deeper of a hole it digs itself into and the more likely a default becomes.
“Individuals are retaining their gold because it would be imprudent to sell when the rupee is anticipated to decline further,” Haji Haroon, the CEO of Chand Gold, explained.
Haroon went on further to explain that recent import restrictions have placed complications on the gold market. Due to Pakistan’s current economic state, importing non-essential products has become near impossible, so bringing in gold isn’t an easy feat. Despite this, the level of gold imports continues climbing each month to meet consumer demand.
The situation in Pakistan is not a one-off occurrence either. Numerous nations around the globe are turning to gold as their local currencies fail. As always, traders should consult their advisors before making any investment decisions.