90% of Pakistan’s gold trade is outside official channels: report

• The study highlights the fragmented distortions of regulation.
• CCP urges labeling to ensure national purity standards.
• The proposed authority aims to unify the governance of the gold sector.

ISLAMABAD: Nearly 90% of gold trade in Pakistan takes place outside official channels due to weak documentation, fragmented regulations and opaque pricing mechanisms, the Competition Commission of Pakistan (CCP) said on Wednesday.

The CPC has published the first evidence-based analysis of Pakistan’s gold sector — conducted by the Commission’s Center of Excellence in Competition Law (CECL) — examining the sector’s structure, regulatory gaps and competition challenges.

According to the report, annual gold consumption in Pakistan ranges between 60 and 90 tonnes, driven by cultural demand, with more than 90% of transactions taking place outside official channels.

With the market almost entirely import-driven, Pakistan imported gold worth $17 million in the 2023-24 financial year.

The report also highlighted the transformational potential of the Reko Diq copper-gold project, which is expected to generate up to $74 billion over its 37-year useful life and significantly change domestic supply chains.

The study identifies several entrenched bottlenecks that distort competition and undermine the functioning of the market, including:

Informal market dominance: Weak documentation and cash-based transactions allow extensive informal networks to set prices and influence supply.

Opaque price setting: Daily gold prices are heavily influenced by traders’ associations rather than transparent market mechanisms.

Fragmented Regulation: The overlapping mandates of the Ministry of Commerce, Federal Board of Revenue (FBR), State Bank of Pakistan (SBP), Pakistan Gems and Jewelery Development Company (PGJDC) and Trade Development Authority of Pakistan (TDAP) lead to policy inconsistencies and enforcement gaps.

High taxes and compliance costs: Complicated procedures and inconsistent taxation encourage smuggling and underpricing.

Limited ability to refine, analyze and label: with negligible refining capacity and inadequate labeling facilities, purity issues persist and consumer protection remains weak.

Missing data: The absence of reliable data on imports, dealer registration, sales and purity limits evidence-based policy making.

To address these gaps, the CPC has recommended the creation of a unified Pakistan Gold and Gems Authority to harmonize rules, permits, imports and compliance with the anti-money laundering (AML) and counter-financing of terrorism (CFT) regimes.

The Commission has also proposed mandatory national designation and trademark to ensure purity standards, strengthen consumer protection and support exports.

Further reforms proposed include digital transformation of the gold value chain through blockchain-based traceability linked to FBR’s Track and Trace system, creation of a Gold Banking System inspired by the Turkiye model to channel household gold into the official sector, and strengthening data governance with centralized reporting, documentation and scientific price monitoring.

The CPC noted that modernizing the gold sector will enhance transparency, curb illicit trade, protect consumers and unlock significant economic value — particularly as Pakistan prepares to commercialize Reko Diq.