SBP governor stresses need for stronger capital markets

Low domestic savings, weak corporate debt and equity markets seen as hurdles to growth

KARACHI:

Governor State Bank of Pakistan (SBP) Jameel Ahmad has stressed the need for well-developed, deep and diversified capital markets to complement the banking sector and support long-term, sustainable economic growth.

According to a statement released on Monday, Ahmad was speaking at the conference "Unlocking the Capital Markets Potential for Banks" held in Karachi.

In his address, the SBP governor said macroeconomic conditions have improved with inflation falling and growth gradually recovering, but structural challenges such as low domestic savings persist. With a savings rate of just 7.4% of GDP compared to 27% in South Asia, Pakistan remains heavily reliant on external financing, contributing to recurring external account pressures and boom-bust cycles, he noted. Ahmad emphasised the role of robust capital markets in channelling domestic savings into productive sectors, saying they must be supported by a resilient banking system.

The governor highlighted recent SBP reforms aimed at broadening participation in the bond market. These include allowing non-bank institutions to act as Special Purpose Primary Dealers and expanding Investor Portfolio Securities (IPS) accounts to microfinance banks, the Central Depository Company (CDC) and the National Clearing Company of Pakistan Limited (NCCPL). He said the reforms will 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, Ahmad expressed concern over the limited development of corporate debt and equity markets. Outstanding corporate bonds account for less than one percent of GDP, with little secondary market activity and low participation from non-financial sectors. Similarly, equity market penetration remains modest, with investor accounts and market capitalisation lagging behind peer economies.

The governor concluded by urging coordinated efforts among regulators, financial institutions, government bodies and investors to promote financial literacy, expand participation, and build a transparent, innovation-friendly market ecosystem.