In a strategic move to bolster Pakistan’s economic development, Mr. Khurram Zafar, the Chief Executive Officer (CEO) of Pakistan Mercantile Exchange (PMEX), emphasized the importance of connecting local markets with global competitive standards. In an exclusive interview on January 7, 2025, Mr. Zafar outlined PMEX’s efforts to integrate automation, digitization, and a more efficient supply value chain into Pakistan’s agriculture and commodity markets. This modernization, according to him, is vital for improving the country’s export potential and competing in the global market.
Mr. Zafar stressed that the use of best practices, such as commodity grading and standardization, is essential for meeting the expectations of international buyers. “Modernization is necessary to connect our markets with global markets and improve our export potential. It will compel the use of best practices like commodity grading and standardization, which international buyers rely upon,” he said.
One of the key goals of PMEX is to introduce innovation in agriculture and commodity markets to improve efficiency, enhance price discovery, and reduce waste. Mr. Zafar envisions a future where Pakistan’s currently fragmented commodity markets will be integrated into a unified national trading platform. This integration aims to reduce the cost of intermediation, improve price discovery, and facilitate easier access to financing for traders against their commodities.
PMEX is currently the only regulated exchange in Pakistan that can issue and trade commodity derivatives. These derivatives are investment contracts where a trader agrees to buy or sell a specific quantity of a physical commodity at a specified price on a future date to hedge against price fluctuations. For the current fiscal year, PMEX has already registered a trading volume of around Rs 3,800 billion, signaling strong demand and trust in the platform.
Mr. Zafar explained that PMEX is focused on linking its derivative futures contracts with Pakistan’s local economy. This connection will support the development of efficient markets for spot price discovery of underlying commodities. Furthermore, PMEX is working on digitizing agriculture and commodity markets across the country, forging partnerships with various stakeholders, including warehouse operators, quality graders, farmers, traders, buyers, banks, insurance companies, and agriculture input suppliers.
A significant challenge facing Pakistan’s agricultural sector is the lack of storage infrastructure, leading to large-scale wastage of agricultural produce. To address this, PMEX is working to encourage both small and large investors to build accredited storage facilities. These facilities would allow farmers to safely store their harvests and obtain financing from banks against them, thus reducing wastage and supporting the agricultural economy.
Mr. Zafar also called for the government’s collaboration with PMEX to modernize Pakistan’s market economy. He suggested that just as Special Economic Zones (SEZs) have been established for industry, the government should also create Special Agriculture Markets Zones to incentivize investment in the new markets ecosystem. This would encourage farmers, traders, commission agents, and buyers to participate in the new platform, improving liquidity and market activity.
The CEO also emphasized the crucial role of existing stakeholders, particularly commission agents (Aarhtis), in ensuring liquidity in the new ecosystem. The design of the platform must ensure that these stakeholders remain integral to the system.
As Pakistan’s first and only demutualized commodity futures exchange, PMEX, licensed and regulated by the Securities and Exchange Commission of Pakistan (SECP), has been at the forefront of modernizing the commodity markets. The exchange offers a complete suite of services, including trading, clearing, settlement, custody, and back-office operations, all under one roof.
PMEX has introduced several innovative products, such as 24K fractional gold contracts, which allow investors to purchase gold starting from as low as 300 Rupees. The exchange ensures the gold’s purity, safe storage, and insurance, while also offering investors the option to sell their gold at any time or request physical delivery when the held amount exceeds the minimum delivery size requirements.
In conclusion, Mr. Zafar expressed confidence that PMEX, with its sophisticated risk management infrastructure and state-of-the-art technology, is well-positioned to play a pivotal role in Pakistan’s sustainable economic development. Through collaboration and integration of local markets with global standards, PMEX aims to drive the country’s economic growth and ensure that Pakistan’s commodity markets compete on the global stage.