The Governor State Bank of Pakistan (SBP) Jameel Ahmad, on Friday, emphasised the need to substantially increase credit allocation to projects that enhance climate resilience and promote environmentally sustainable growth.
"It is essential that we leverage our financial sector's potential to align with the global shift toward sustainability, thereby contributing to both our national priorities and international commitments," he said while addressing an event titled "Enabling Green Financing and Green Bonds via Credit Enhancement Solutions," organised by InfraZamin Pakistan.
The governor highlighted the global urgency to address climate change, citing massive natural disasters such as the catastrophic floods in 2022, which caused economic losses of approximately $30 billion in Pakistan.
Ahmad reiterated Pakistan's commitment to the Paris Agreement, which includes reducing emissions by 15% by 2030, with an additional 35% reduction contingent upon external financing. He also noted plans to generate 60% of all energy from renewable sources and elaborated on the significant strides made by Pakistan despite macroeconomic challenges and the critical role played by SBP.
Pakistan is also transitioning away from fossil fuels at a faster rate than many regional economies and it was reflected in the global data compiled by the Energy Institute that the share of fossil fuels in Pakistan's overall energy consumption has declined by 4.8 percentage points; from 86.7% in 2019 to 81.9% in 2023.
The government has taken a number of measures to make the country and its economy more resilient to the adverse impacts of climate change which included a comprehensive "Resilient, Recovery, Rehabilitation, and Reconstruction Framework" and National Clean Air Policy, he said adding that the government was also promoting electric and hybrid vehicles in the country.
Ahmad shared that SBP has introduced refinancing schemes for renewable energy, disbursing Rs94.7 billion by the end of June 2024, financing more than 4,500 renewable energy projects with a cumulative energy generation capacity of almost 2,061 MW. SBP has also issued comprehensive Green Banking Guidelines to enable regulated entities to recognise and manage environmental risks arising from their operations, he added.
SBP, in collaboration with the World Bank, is developing a comprehensive Green Taxonomy to establish a standardised framework for the classification of green and transitional activities, he informed and added, "This will provide a clear framework for identifying and classifying green and transitional activities, facilitating the flow of capital into sustainable projects."
The governor shared that SBP has included climate change risk as a key theme in its Strategic Plan 2023-28 which outlines a range of goals and policy initiatives for the next five years to ensure sustainable growth including technological innovation, diversity and inclusion, productivity and competitiveness, and strategic communications.
He added that an additional $500 million is expected from the Asian Development Bank, with economic growth likely to exceed 3% for FY25, aligning with SBP's 2.5-3.5% target.
Ahmad reported that the country's foreign exchange reserves continue to grow despite a recent $1 billion debt repayment, projecting reserves to reach $12 billion in November, up from $11.17 billion. This increase follows a $1 billion International Monetary Fund loan tranche received in September. Ahmad anticipates reserves will rise to $13 billion by the fiscal year-end in June 2025.
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