SBP, gold exporters lock horns over export proceeds mechanism

The State Bank of Pakistan (SBP) and gold exporters have disagreed over the mechanism for realising export proceeds, with the central bank opposing proposals to allow full settlement in gold.

According to a news report, the issue was discussed at a meeting convened by the Commerce Ministry, attended by representatives from the Federal Board of Revenue, Ministry of Industries and Production, SBP, and private sector stakeholders from the jewellery industry.

Under the current framework, exporters are required to realise at least 50 per cent of proceeds in foreign exchange through banking channels, while the remaining 50 per cent can be settled in either foreign exchange or precious metals.

Industry representatives proposed removing this restriction to allow 100 per cent realisation in gold, citing losses due to fluctuations in gold prices and exchange rates.

The SBP maintained that the existing 50:50 arrangement should continue and asked stakeholders to submit a formal proposal for review.

The meeting also discussed the value-addition mechanism under SRO 760(1)/2013, which links export value to international gold prices. Industry representatives said the system is misaligned with market conditions, noting that gold prices have risen from around $1,380 per ounce in 2013 to about $5,100.

Stakeholders proposed shifting to a per-gram value-addition model, suggesting $1.50 per gram for bangles and chains, $2 per gram for plain jewellery, and $4 per gram for studded jewellery.

Participants agreed that the value-addition framework requires revision, with consensus to move toward a per-gram system.

The meeting also reviewed inconsistencies in sales tax treatment of gold imports. While imports under SRO 760 are intended to be exempt from duties and taxes, the current law applies 18 per cent sales tax to certain import categories.

Stakeholders proposed aligning the exemption with SRO 760 by amending the relevant provision in the Sixth Schedule, and the recommendation will be taken up with the Finance Division.

The cap on gold imports, set at 25 kilograms on a revolving basis, was also discussed. The private sector withdrew its demand for removal after noting that the limit had not been reached.

Participants agreed that further consultations are required to develop a comprehensive policy on gold imports and export proceeds realisation for the jewellery sector.