KARACHI: State Bank of Pakistan (SBP) Governor Jameel Ahmad on Monday cautioned that while key macroeconomic indicators have shown improvement, Pakistan continues to face structural challenges, particularly its persistently low domestic savings rate.
Addressing a seminar in Karachi, the SBP chief acknowledged the positive economic progress, including a reduction in inflation and a recovery in growth. However, he emphasized that long-standing structural issues, like the low savings rate, continue to impede sustainable growth.
“One of the most serious among them is our persistently low domestic saving rate,” Ahmad said, citing the latest Pakistan Economic Survey, which shows that Pakistan’s savings rate stands at just 7.4% of GDP, a stark contrast to the 27% average in South Asia and 41% in East Asian economies.
The Governor pointed out that this low savings rate forces Pakistan to rely heavily on foreign inflows to meet its development needs, which has contributed to balance of payment crises, foreign exchange market instability, and inflationary pressures, all of which undermine growth.
To break the boom-bust cycle, Ahmad stressed the importance of mobilising domestic savings and directing them into productive investments. He also highlighted the development of Pakistan’s government bond market, which now offers a range of fixed-rate, floating-rate, and Sharia-compliant securities.
Despite these improvements, the SBP chief noted that the bond market remains concentrated in the banking system. To address this, the SBP has expanded access to government securities for microfinance banks, CDC, and NCCCPL, providing millions of branchless and mobile banking users with opportunities to invest.
Moreover, Ahmad pointed out that the corporate debt market remains underdeveloped, with corporate bonds making up less than 1% of Pakistan’s GDP, a stark comparison to other Asian economies.
He concluded that non-financial firms, especially in manufacturing, infrastructure, and renewable energy sectors, remain almost entirely reliant on bank loans.
