Unlocking Capital Market Potential for Sustainable Economic Growth

Strategic Insights -

Federal Minister for Finance and Revenue Senator Mohammad Aurangzeb highlighted the need to tap the full potential of Pakistan's capital markets to secure long-term and sustainable economic growth. He proposed the creation of a Capital Market Development Council to streamline and oversee capital market affairs. Aurangzeb also emphasized the importance of private sector leadership in driving economic growth, praising the State Bank of Pakistan's (SBP) reforms but calling for further development to improve financial literacy and expand participation.

Key Takeaways:

  • Senator Mohammad Aurangzeb proposed the creation of a Capital Market Development Council to oversee and streamline capital market affairs.
  • The Finance Ministry will design the tax policy for FY2026, shifting this role away from the Federal Board of Revenue (FBR).
  • The government's newly launched tariff policy is part of a home-grown agenda focused on moving Pakistan from stabilization toward sustained growth.
  • The private sector is expected to lead Pakistan's economic growth, with the finance minister emphasizing the importance of this leadership.
  • The State Bank of Pakistan's (SBP) reforms are critical for economic stability, but further development is needed to improve financial literacy and expand participation.
  • The Financial Action Task Force (FATF) grey list has already been exited, and Pakistan will remain out of it.
  • Exchange policy is formulated independently by the SBP, not the government.
  • Talks with the International Monetary Fund (IMF) are ongoing.
  • Pakistan's savings rate is a structural weakness, with the country's savings rate at just 7.4 percent of GDP compared to 27 percent in South Asia.
  • The SBP has taken steps to broaden participation in the government bond market, including the entry of non-bank institutions as Special Purpose Primary Dealers.
  • The SBP has also expanded Investor Portfolio Securities (IPS) accounts to microfinance banks, the Central Depository Company (CDC), and the National Clearing Company of Pakistan Limited (NCCPL).
  • The event was attended by key stakeholders, including PSX Chairperson Dr Shamshad Akhtar, SECP Chairman Akif Saeed, Farrukh Sabzwari, CEO PSX, and presidents and CEOs of banks.

Statistics:

  • Pakistan's savings rate is at 7.4 percent of GDP, compared to 27 percent in South Asia.
  • The outstanding corporate bonds represent less than one percent of GDP.
  • Pakistan's equity market penetration is low, with both investor accounts and market capitalization lagging behind peer economies.
  • The government's new tariff policy is part of a home-grown agenda focused on moving Pakistan from stabilization toward sustained growth.

Sources:

  • Senator Mohammad Aurangzeb
  • Federal Minister for Finance and Revenue
  • Securities and Exchange Commission of Pakistan (SECP)
  • Pakistan Banks Association (PBA)
  • State Bank of Pakistan (SBP)
  • International Monetary Fund (IMF)
  • Financial Action Task Force (FATF)
  • Federal Board of Revenue (FBR)
  • Central Depository Company (CDC)
  • National Clearing Company of Pakistan Limited (NCCPL)