KARACHI: The central bank has reposed trust in the government’s steps to bring the ailing economy back on the path of recovery.
“We are confident that the economy will return to its desired path of macroeconomic stability and continue on a high growth trajectory,” Jameel Ahmad, deputy governor of the State Bank of Pakistan (SBP) said. “The incumbent government seems geared towards addressing the macroeconomic challenges and ensuring higher growth and employment opportunities.”
He was addressing the 3rd Pakistan Banking Awards. Ahmad said monetary and fiscal policies have been working in tandem since the formation of new government.
“The government has proposed cuts in development expenditures and partially reversed tax relief initiatives that were announced in the FY19 budget,” he added. “As things stand, this homegrown stabilisation phase is likely to continue for some time.”
The central bank’s deputy governor said banking industry has to play an effective role when it comes to the provision of financial services to small and medium enterprises, agriculture and housing sectors. “The role of banks become even more important since growth in these sectors is essential to promote large-scale employment generation.”
Ahmad said financial inclusion of the unbanked and disadvantaged segments through digital finance and Islamic financial services carries a significant weight when it comes to improving livelihoods via income generating opportunities.
“Agriculture credit disbursements have been consistently increasing during the last several years due to collective efforts of the industry,” he said. “The road to development of a dynamic, vibrant and sustainable agri-financing sector has been long and uphill.” The SBP’s official said the results of SBP’s multipronged approach to agri-financing have been encouraging as agri-credit disbursement, which stood at a modest Rs294 billion in FY12, has seen a cumulative growth of 230 percent of to reach Rs973 billion in the last fiscal year.
The progress so far in FY19 also appears promising as disbursements for the first quarter rose 36 percent year-on-year to Rs212 billion.
“However, I would like to emphasise that we need to accelerate it further, and aim for a qualitative shift in agricultural financing by adopting innovative techniques for provision of easy and swift credit to small farmers, especially in underserved regions,” Ahmad said. “I am particularly talking about those 5.4 million marginalised landholders who have holding of total land of only up to five acres… there are about 2.1 million farmers with land holdings of more than 5 acres and less than 12.5 acres.”
The central bank deputy governor said the segments of the agri-financing market have largely been excluded from the recent increase in agri-financing and should be the main target of the plans for the sector. Ahmad further said adoption of flexible inflation targeting regime will be an important milestone with regards to SBP strategic plan, “Vision 2020”.
“A number of central banks across the globe with rule-based inflation targeting regimes are opting for some flexibility after witnessing lower than desired inflation and a decline in economic activity during the global financial crisis,” he said.
“SBP is going to engage with the government to announce the medium-term inflation target that is consistent with economic potential of the Pakistan economy.”
Ishrat Husain, a member of the Economic Coordination Committee said banks are on a sound footing.
“Pakistani bankers are no less competent than any other banker across the world. However, banks in the country are not mobilising their deposits like those of the neighbouring countries, which resulted in poor savings,” Husain added.
“A low-saving rate is the main hindrance in the way of higher investment that brings growth to the economy.”
Farooq Shaikh, acting chief executive of the Institute of Bankers Pakistan said the Pakistan Banking Awards recognise the best performers in various categories in the banking sector and the financial community eagerly awaits the results.