State Bank of Pakistan (SBP) Governor Jameel Ahmad has cautioned that despite improvements in key macroeconomic indicators, Pakistan continues to grapple with structural challenges, foremost among them the country’s persistently low domestic savings rate.
The central bank chief made these remarks while addressing the conference ‘Unlocking the Capital Markets Potential for Banks’ held at a hotel in Karachi on Monday.
He said that despite improvement on the economic front, including a decline in the inflation rate and pick-up of growth, “some long-standing structural challenges remain”.
“One of the most serious among them is our persistently low domestic saving rate,” he said.
The SBP chief, while citing the latest Pakistan Economic Survey, said that Pakistan’s domestic saving rate stands at 7.4% as a percentage of GDP.
“This is significantly lower when compared to an average of 27% in South Asia and 41% in East Asian economies.”
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Jameel said that due to a low savings rate, Pakistan heavily relies on foreign inflows to meet its development needs.
“But this reliance has come at a cost,” he said. “It has contributed to repeated balance of payment crises, instability in the FX markets and inflationary pressures, which, over time, have weakened our growth momentum.”
The central bank chief was of the view that in order to avoid the boom-bust cycle, Pakistan needs to mobilise more domestic savings and channelise them into productive investments.
Elaborating on the current state of Pakistan’s capital markets, the central bank chief shared that in the last two decades, Pakistan’s government bond market has developed into offering a broad range of securities, including fixed rate, floating rate and Sharia-compliant options of various maturities.
“However, the government bond market remains heavily concentrated within the banking system,” he noted.
Jameel shared that the SBP has taken steps to broaden access and deepen the country’s bond market, including revamping the primary dealer system.
“The scope of the investor portfolio’s securities account has also been expanded to microfinance banks, CDC and NCCCPL. This provides close to 100 million branchless banking and mobile banking users in the country an opportunity to invest in government securities.”
Moreover, account opening has been simplified through the Customer’s Digital Onboarding Framework, he said. “Together these reforms aim to diversify the investor base, enhance liquidity and make the sovereign segment more resilient.”
He noted that the corporate debt market remains largely absent. “Outstanding corporate bonds amount to less than 1% of our GDP, substantially lower than the Asian countries.”
Jameel said that non-financial firms, as well as sectors including manufacturing, infrastructure and renewable energy, remain almost entirely dependent on bank loans.
Similarly, equity market penetration remains modest, with investor accounts and market capitalisation lagging behind peer economies.
The Governor concluded by calling for coordinated efforts among regulators, financial organisations, government institutions and investors to promote financial literacy, expand participation, and build a transparent, innovation-friendly market ecosystem.
