State Bank of Pakistan (SBP) Governor Jameel Ahmad has cautioned that despite recent gains in economic stability, Pakistan continues to face long-standing structural challenges, with the country’s persistently low domestic savings rate emerging as the most pressing issue.
Speaking at the conference titled “Unlocking the Capital Markets Potential for Banks” in Karachi, the SBP governor noted that while inflation has eased and growth momentum has picked up, deeper systemic weaknesses still threaten long-term progress. “One of the most serious among them is our persistently low domestic saving rate,” Ahmad said.
Citing the Pakistan Economic Survey, he highlighted that domestic savings stand at just 7.4 percent of GDP, a figure that pales in comparison to South Asia’s average of 27 percent and East Asia’s 41 percent. He warned that Pakistan’s heavy reliance on foreign inflows to finance its development has created recurring vulnerabilities. “This reliance has come at a cost. It has contributed to repeated balance of payment crises, instability in foreign exchange markets and inflationary pressures, which, over time, have weakened our growth momentum,” Ahmad remarked.
The SBP governor underscored the need to mobilize more domestic savings and channel them into productive sectors to escape the country’s recurring boom-bust cycle. He called for building stronger linkages between domestic capital markets and long-term investment opportunities.
Outlining the progress in Pakistan’s financial markets, Ahmad said that in the past two decades, the government bond market has expanded significantly, offering fixed-rate, floating-rate, and Sharia-compliant instruments of various maturities. However, he acknowledged that this market remains heavily concentrated within the banking system.
To address this imbalance, the SBP has introduced measures to diversify participation and deepen access. These include revamping the primary dealer system and extending securities account facilities to microfinance banks, the Central Depository Company (CDC), and the National Clearing Company of Pakistan Limited (NCCPL). According to Ahmad, this reform allows nearly 100 million branchless and mobile banking users across the country to invest directly in government securities. Simplified digital account opening procedures under the Customer’s Digital Onboarding Framework have also been introduced to make investment participation more accessible.
While sovereign debt markets have made progress, Ahmad lamented the absence of a robust corporate bond market. “Outstanding corporate bonds amount to less than 1 percent of GDP, which is substantially lower than comparable Asian economies,” he said. Non-financial firms and key sectors, including manufacturing, infrastructure, and renewable energy, remain almost entirely dependent on commercial bank loans, limiting their growth potential.
Equity market penetration also remains low, with Pakistan trailing regional peers in both market capitalisation and the number of investor accounts. Ahmad emphasized that without expanding capital market depth, reliance on banks alone will continue to constrain the financial system’s ability to fund sustainable growth.
The SBP governor concluded his address by calling for stronger collaboration between regulators, financial institutions, government agencies, and investors. He stressed the importance of financial literacy, broader market participation, and the creation of a transparent and innovation-driven ecosystem to support the country’s economic ambitions.