SBP governor expects Pakistan to achieve 3pc growth in FY21

KARACHI: Pakistan will achieve gross domestic product growth of at least 3 percent this fiscal year and above 4 percent in the next fiscal year as the policy measures employed by central bank and government turned the trajectory upward, State Bank of Pakistan (SBP) Governor Reza Baqir said on Monday.

“One year ago, we were facing the first wave of Covid, and now it’s the third wave. The basic difference is that last year the economy was going through a recovery mode and indicators were negative, but now the indicators are positive,” Baqir said, referring to robust growth in large scale manufacturing, higher remittances, and record sales of cement and automobiles.

“The fast-moving consumer goods index maintained by the central bank is showing a real growth of 8.7 percent in the year to date, which was at a decline of 3 percent last year.” Pakistan Stock Exchange (PSX) hosted SBP Governor at the gong ceremony to mark the beginning of a new chapter of cooperation between SBP and PSX on multiple initiatives.

SBP and PSX have recently been working closely to improve and widen the access of capital market participants to government debt securities, facilitate investments by non-residents in the stock exchange, remove bottlenecks hindering companies from leveraging against shares of their group companies and developing information sharing arrangements between banks and capital markets.

Baqir said SBP revised the rules governing appointment of primary dealers for the government’s debt securities. “This will expand the list of institutions eligible to work as primary dealers, including security depositories and clearing institutions. This measure is aimed at widening the investor base of government securities, improving liquidity, enhancing transparency and promoting market development.”

In addition, SBP has relaxed the selection and performance criteria for development finance institutions, investment banks and brokerage houses to encourage them to become part of the primary dealer system, which is currently dominated by banks.

While the debt market in Pakistan is well developed and liquid, participation of capital market clients has historically been limited and SBP wants to encourage wider ownership of government securities among retail investors.

SBP governor said the revised primary dealer rules will cater to the needs of a diverse group of investors, including capital market clients, corporates and individuals, and will attract a new clientele to the government securities market.

Baqir said SBP and PSX are jointly working on expanding the scope of know your customer information sharing arrangements between banks and Central Depository Company of Pakistan or National Clearing Company of Pakistan Limited (NCCPL) for existing bank account holders.

“Such arrangements will facilitate capital market players in mobilizing domestic resources and channeling them effectively to productive uses.”

Speaking on the occasion, PSX Managing Director Farrukh Khan said Pakistan’s stock market is one of the best performing markets in Asia. “This is in large part due to the proactive and aggressive monetary, fiscal, social and other measures taken by SBP and the government.”

“We are working on a number of important initiatives with SBP, including sharing of KYC for domestic bank account holders. Another important area is the trading of government debt securities in the stock market, which will allow a much wider group of investors to participate in the government debt market and provide even greater price transparency.”

Khan proposed to work with banks and asset management companies to creating fixed income and equity exchange traded funds to target and meet the requirements of overseas Pakistanis.

“This will make it much easier for them to invest in Pakistan through their Roshan digital accounts. I think this will be an important new product in the future evolution and growth of RD accounts.”