Low Savings Rate Forces Greater Reliance on Foreign Debt: SBP Governor

KARACHI:State Bank of Pakistan (SBP) Governor Jameel Ahmad has stated that while Pakistan’s macroeconomic conditions have improved and inflation is on the decline, the country continues to face structural challenges, particularly its persistently low savings rate.
Speaking at a workshop on “Opportunities for Banks in Capital Markets,” Governor Ahmad emphasized that Pakistan’s savings rate stands at only 7.4% of GDP, compared to the South Asian regional average of 27%. This significant gap compels Pakistan to rely heavily on external borrowing, creating frequent pressure on the external account and contributing to repeated boom-bust cycles.
He underlined the importance of well-developed, deep, and diversified capital markets to complement banking sector activity and support long-term and sustainable economic growth. “Fully developed capital markets, alongside a stable banking system, are essential for sustainable economic development,” he said.
Highlighting recent reforms undertaken by the SBP to deepen the domestic bond market, Ahmad mentioned the inclusion of non-bank entities as Special Purpose Primary Dealers and the expansion of Investor Portfolio Securities (IPS) accounts to microfinance banks, the Central Depository Company (CDC), and the National Clearing Company of Pakistan Limited (NCCPL). These reforms, he noted, provide new investment opportunities for digital banking users and lay the foundation for a broader market base.
Despite progress in the government bond market, the SBP governor expressed concern over the sluggish development of Pakistan’s corporate debt and equity markets. Outstanding corporate bonds remain below 1% of GDP, with minimal activity in the secondary market and negligible participation from the non-financial sector. Likewise, the equity market remains limited in reach, with fewer investor accounts and significantly lower market capitalization compared to peer economies.
Ahmad stressed the need for coordinated efforts among regulators, financial institutions, public sector entities, and investors to promote financial literacy, increase inclusion, and build a transparent and innovative market ecosystem.