SBP Governor stresses role of capital markets in growth

August 18, 2025 (MLN): The importance of well-developed, deep, and diversified capital markets was underscored by Governor State Bank of Pakistan (SBP) Mr. Jameel Ahmad, who said such markets are vital to complement the banking sector and support long-term, sustainable economic growth.

He was speaking at the conference “Unlocking the Capital Markets Potential for Banks” held in Karachi.

The event was attended by Federal Minister for Finance and Revenue Mr. Muhammad Aurangzeb, Chairperson PSX Dr. Shamshad Akhtar, Chairman SECP Mr. Akif Saeed, Mr. Farrukh Sabzwari, CEO PSX, along with presidents and CEOs of banks and other stakeholders.

In his address, the Governor noted that while macroeconomic conditions have improved, with inflation falling and growth gradually recovering, structural challenges such as low domestic savings persist.

With a savings rate of just 7.4% of GDP, compared to 27% in South Asia, the country remains overly reliant on external financing, contributing to recurring external account pressures and boom-bust cycles, he said.

Mr. Ahmad emphasized the role of robust capital markets in channeling domestic savings into productive sectors, adding that well-developed, deep, and diversified markets complemented by a resilient banking system are essential for sustainable economic development.

He highlighted recent SBP reforms to broaden participation in the bond market, including the inclusion of non-bank institutions as Special Purpose Primary Dealers.

The reforms also expand Investor Portfolio Securities (IPS) accounts to microfinance banks, the Central Depository Company (CDC), and the National Clearing Company of Pakistan Limited (NCCPL).

These measures, he noted, open new investment avenues to millions of digital banking users and lay the foundation for broader market development.

Despite progress in the government bond market, the Governor expressed concern over the limited development of corporate debt and equity markets, according to the press release issued today.

Outstanding corporate bonds account for less than one percent of GDP, with limited secondary market activity and low participation from non-financial sectors.

Similarly, equity market penetration remains modest, with investor accounts and market capitalization trailing behind peer economies.

He concluded by calling for coordinated efforts among regulators, financial organizations, government institutions, and investors to promote financial literacy, expand participation, and build a transparent, innovation-friendly market ecosystem.

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