The regulatory landscape for Pakistan’s jewelry export sector is currently witnessing a significant tug-of-war between the State Bank of Pakistan and private sector stakeholders. At the heart of the dispute is the mechanism for realizing export proceeds, with the central bank reportedly opposing a new proposal that would allow for full settlement in gold. This development surfaced during a high-stakes meeting organized by the Commerce Ministry, which brought together officials from the Federal Board of Revenue, the Ministry of Industries and Production, and key representatives from the domestic jewelry trade to address long-standing bottlenecks in the sector.
Under the current regulatory framework governing these transactions, exporters are strictly required to realize at least 50 percent of their proceeds in foreign exchange through formal banking channels. The remaining half of the value can be settled using either foreign exchange or physical precious metals. However, industry leaders are pushing for a total overhaul of this restriction. They have proposed allowing 100 percent realization in gold, arguing that the existing split model exposes them to significant financial losses. These losses are primarily driven by the extreme volatility in international gold prices coupled with the unpredictable fluctuations in the rupee’s exchange rate, making it difficult for businesses to maintain stable margins.
The State Bank of Pakistan has maintained a conservative stance on the matter, insisting that the 50:50 arrangement must continue for the time being to ensure a steady inflow of foreign currency into the national reserves. While the central bank did not outright reject the possibility of future changes, it has requested that stakeholders submit a formal, detailed proposal for a comprehensive technical review. This cautious approach reflects the broader priority of the monetary authority to stabilize the country’s external account, even as traders argue that the current rules are stifling the growth potential of high-value jewelry exports.
Beyond the realization of proceeds, the meeting delved into the technicalities of the value-addition mechanism under SRO 760. Industry representatives pointed out that the current system is fundamentally misaligned with the modern economic reality. When the original framework was established in 2013, gold was trading at approximately $1,380 per ounce. Fast forward to 2026, and the price has surged to nearly $5,100 per ounce. Because the current value-addition requirements are linked to these outdated international benchmarks, exporters find themselves struggling with a system that does not reflect the actual cost of production or market conditions.
To remedy this, a consensus is building toward shifting to a per-gram value-addition model. The proposed figures include a fixed rate of $1.50 per gram for basic items like bangles and chains, $2 per gram for plain jewelry, and a higher tier of $4 per gram for more complex studded pieces. Participants in the discussion generally agreed that moving toward this granular system would provide much-needed clarity and fairness for manufacturers. This shift would allow the industry to focus on craftsmanship rather than being penalized by the sheer upward trajectory of raw material costs on the global stage.
Taxation inconsistencies also occupied a significant portion of the agenda. Although imports under SRO 760 are theoretically intended to be exempt from duties and taxes to encourage export-oriented growth, conflicting legal provisions have led to the application of an 18 percent sales tax on certain import categories. Stakeholders have called for an immediate amendment to the Sixth Schedule to align the tax code with the intended exemptions. While the private sector initially sought to remove the 25-kilogram cap on gold imports, that demand was eventually withdrawn after data revealed the limit has not yet been reached. The session concluded with an agreement that further consultations are necessary to finalize a cohesive policy that balances the central bank’s needs with the industry’s desire for a more flexible, tech-friendly trading environment.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.