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LOW Source:
Pakistan Deaths
Pakistan Cases
1.38% positivity

KARACHI: State Bank of Pakistan (SBP) Governor Reza Baqir is confident that the country’s GDP growth would be at 3 percent in the current fiscal year that will further increase to over 4 percent in next financial year due to various measures taken by the central bank and the government.

Pakistan’s GDP growth was in negative during last fiscal year when the country was facing negative impact of the first wave of COVID-19. “The country entered third wave of COVID-19, however, we will tackle it successfully,” the Governor SBP said while speaking at the gong ceremony held by Pakistan Stock Exchange (PSX) Monday. PSX hosted SBP Governor Dr Reza Baqir at this ceremony to mark the beginning of a new chapter of cooperation between SBP and PSX on multiple initiatives.

The 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.

Speaking on the occasion, Baqir said he was pleased to visit PSX for this gong ceremony as it marked the commitment of the SBP and PSX to work together for the deepening of debt and capital markets in Pakistan and improving financial intermediation. He made three important announcements in this regard.

First, he said the SBP has 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, the SBP has relaxed the selection and performance criteria for development finance institutions (DFIs), investment banks and brokerage houses to encourage them to become part of the primary dealer system, which is currently dominated by banks. Hence, among other privileges offered to primary dealers, a larger and more diverse group of institutions will now have direct access to primary auctions.

He said that while the government debt market in Pakistan is well developed and liquid, participation of capital market clients has historically been limited and the SBP wants to encourage wider ownership of Government securities among retail investors. The governor SBP noted that 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. Governor Baqir shared that this measure has been taken after detailed discussions with stakeholders and a comprehensive review of international best practices.

Second, Baqir said the SBP has made changes in its prudential regulations to facilitate the sponsors, shareholders and companies in raising more financing against the security of shares of their group companies. He highlighted that this amendment will help sponsors and companies in raising liquidity for further investment in new business opportunities and ventures, in turn leading to greater economic activity. This regulatory change would also benefit the capital markets by encouraging sponsors of companies to consider listing on the stock exchanges. As a result, it will also promote documentation of the economy, transparency, and good corporate governance practices.

Third, Dr Baqir apprised the audience the SBP and PSX are jointly working on expanding the scope of KYC information sharing arrangements between banks and Central Depository Company of Pakistan (CDC) or National Clearing Company of Pakistan Limited (NCCPL) for existing bank account holders. He was delighted to reveal that the tangible progress has been made and was hopeful that this important initiative will be successfully rolled out by the end of the next month. He further added that such arrangements will facilitate capital market players in mobilizing domestic resources and channeling them effectively to productive uses.

The governor SBP was warmly welcomed by the chairman of the Board, PSX, Sulaiman S Mehdi; board members of PSX; MD and CEO of PSX, Farrukh Khan and the senior management of PSX.

Welcoming the SBP Governor, PSX MD Farrukh Khan said that he was confident that the visit of Governor Reza Baqir to Pakistan Stock Exchange will mark the beginning of a new collaborative journey dedicated to greater coordination between PSX as the frontline regulator of the capital market and the SBP as the regulator for the banking industry in the country. This greater coordination would help to promote and foster an environment of increased activity in terms of online initiatives, the recently launched Roshan Digital Accounts for Overseas Pakistanis, and Government Debt Securities, amongst other segments. He said the journey of added cooperation and between PSX and the SBP will benefit all stakeholders of the capital market, the banking industry and the economy of Pakistan. He expressed confidence that the SBP and PSX will together be able to lay a pathway for facilitating greater online participation in terms of account opening and activity by brokers and investors, as well as for increasing the number of investors investing in different asset classes in the capital market of Pakistan.

He said Pakistan’s stock market is one of the best performing markets in Asia. This is in a large part due to the proactive and aggressive monetary, fiscal, social and other measures taken by Governor SBP. “You listened to all the stakeholders and moved quickly,” he said.

Best performing market in Asia is great, but to be honest is not quite good enough, he said. Pakistan’s capital market needs to be and can be much larger and deeper than it is today. The role and importance of capital markets is not always fully appreciated. They can play a significant role in tackling three of the main structural imbalances that have bedeviled Pakistan’s economy over the years, lack of documentation, low savings rates and low investment rates.

“We are working on a number of important initiatives with SBP, including sharing of KYC for domestic bank account holders, along the lines of RDA. We are thankful to the SBP for forming a committee of banks and capital market intermediaries. All issues have been discussed and resolved in principle and we hope to launch this soon,” he said.

He acknowledged and thanked all the banks who responded very positively to PSX’s proposals. This will be a huge step forward in improving financial inclusion and converting savings into investments by increasing the investor base in Pakistan, he said.

Another important area is the trading of government debt securities in the stock market. “We have been working closely with SBP and banks to identify issues in the primary and secondary market,” he said.

This will allow a much wider group of investors to participate in the government debt market and provide even greater price transparency. PSX’s new trading system will allow all investors to buy and sell government debt securities from the comfort of their home or office.

He said PSX is committed to providing a robust and transparent trading platform to help businesses raise capital and for all investors to make a good return. To achieve this PSX is implementing, with the support of the Chinese partners, a state of the art trading and surveillance system, at a total cost of over $5 million. Phase 1 of the surveillance system has already been implemented and the trading system will IA be implemented before mid of 2021. Also present at the gong ceremony were senior members of the market, banks’ presidents and treasury heads along with senior management of the SBP.

Copyright Business Recorder, 2021


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