Central bank governor urges urgent reforms to diversify Pakistan’s capital markets

State Bank of Pakistan (SBP) Governor Jameel Ahmad has called for urgent and coordinated action to deepen and diversify Pakistan’s capital markets, describing them as essential to achieving long-term, sustainable economic growth.

Speaking at the conference titled ‘Unlocking the Capital Markets Potential for Banks’, held in Karachi, Ahmad highlighted the pressing need to reduce the country’s over-reliance on external financing.

The event brought together key figures from the financial sector, including Federal Minister for Finance and Revenue Muhammad Aurangzeb, PSX Chairperson Dr Shamshad Akhtar, SECP Chairman Akif Saeed, PSX CEO Farrukh Sabzwari, as well as presidents and CEOs of major banks.

In his address, the SBP governor noted that although macroeconomic indicators are showing signs of recovery—with declining inflation and gradually improving growth—Pakistan continues to grapple with deep-rooted structural challenges. Chief among them is a persistently low domestic savings rate, which stands at just 7.4% of GDP, compared to the regional average of 27% in South Asia.

“This reliance on external financing fuels recurring balance of payments crises and boom-bust cycles,” Ahmad cautioned. He stressed the importance of mobilizing domestic resources through robust capital markets to direct savings into productive investments, complementing the role of the banking sector.

Ahmad also outlined key reforms undertaken by the SBP to broaden market participation. These include allowing non-bank institutions to operate as Special Purpose Primary Dealers and expanding Investor Portfolio Securities (IPS) accounts to include microfinance banks, the Central Depository Company (CDC), and the National Clearing Company of Pakistan Limited (NCCPL).

These steps, he noted, open investment avenues for millions of digital banking users and lay the groundwork for broader market development.

Despite progress in government bond markets, the governor voiced concern over the underdevelopment of corporate debt and equity markets. Currently, outstanding corporate bonds account for less than 1% of GDP, with low levels of trading and minimal participation from non-financial sectors. Similarly, Pakistan’s equity market continues to lag behind regional peers in terms of investor base and market capitalization.

Concluding his remarks, Ahmad called for enhanced collaboration between regulators, financial institutions, government bodies, and investors to foster financial literacy, broaden participation, and cultivate a transparent, innovation-driven market ecosystem.

“This is not just a policy imperative—it is a national economic necessity,” he affirmed.