Growth rebounds in positive trajectory following reforms: Shamshad

KARACHI: Caretaker Finance Minister Dr Shamshad Akhtar on Saturday said despite challenges there has been significant progress in macroeconomy, exchange rate and financial stability and due to interim government reforms the country’s GDP growth has rebounded in positive trajectory in the range of 2 to 2.5 percent with agriculture expected to grow by 5.6 percent with crops leading the path and industry by 2.5 percent current financial year.

“The economic recovery process has boosted business confidence and market sentiment and the Pakistan Stock Exchange (PSX) has witnessed a bullish momentum over the last five months showing heft gains of over 50 percent,” Dr Shamshad Akhtar said while speaking at IPO Summit through video link from Islamabad.

The IPO Summit 2024 was organized by Pakistan Stock Exchange, in collaboration with Central Depository Company (CDC) and National Clearing Company of Pakistan Limited (NCCPL), under the aegis of the Securities and Exchange Commission of Pakistan (SECP) to Empowering the Future of Capital Markets at a hotel in Karachi.

Finance Minister said that current account is in surplus and the country’s foreign exchange reserves have increased to $9.1 billion due to IMF tranche and multilateral flows.

She said that the restructuring in the FBR made by the interim government would help to achieve tax collection reaching to Rs 10 trillion.

During the caretaker government, the stock market witnessed an increase of 50 percent in the first half of 2023 against only 3 percent in the first half of the same year. However the capital market saw only one IPO, she said and added that the capital market cannot thrive under the high interest rate regime.

Finance Minister said restoring confidence in the economy and markets in the past few months has been very rewarding. The Government and market leaders had availed this opportunity to build on past policy and institutional reforms for stock market capitalization.

The finance minister said for years the North American IPO scene dominated. But the tide is turning. Asia Pacific now reign supreme accounting for almost half the global deals and nearly half the global proceeds. “We could also follow their leads and there is nothing stopping us. But we have to get out of our mindset of bank driven financing which is creating a huge incentive and noise in the financial market not allowing for diversification of financial markets, not allowing for our banking system to lend effectively; private credit and private markets are stifled because of the non-transparent lending”, she said.

“We in capital markets, globally and domestically believe in transparency, effective governance, and full disclosure. We scrutinise investors and issuers and we are proud of that because it will bring long term sustainability.”

According to her, using gimmicks to raise capital is not the way forward for a country having bigger economic issues. Move forward and embrace the IPO wave and do not stick to the old practices. Regulatory waters are in flux, new accounting standards, stricter listing requirements and increased scrutiny and transparency have in fact dotted the IPO pipeline. Adaptability and proactive approach are key to navigating regulatory undercurrents, she said.

Speaking via video link, Chairman SECP Akif Saeed said that a vibrant corporate sector and capital market can serve as an engine of economic growth and establish Pakistan as a choicest investment destination.

He said the SECP has always been a strong proponent for creation of an enabling ecosystem, whereby companies can easily tap into the capital markets for meeting their funding requirements in a cost-effective and convenient manner. The SECP has remained firmly committed to this end and introduced several reforms to make the IPO process swift and convenient. In addition to use of technology to automate and digitalize the IPO process, the IPO approval process has been completely overhauled to drastically reduce timelines for processing regulatory approvals relating to a listing application and prospectus. Now all regulatory approvals at SECP and PSX are processed within 14 working days. As a result, a company can complete remaining procedural requirements and conclude the entire process of raising funds from the general public through an IPO within a total period of 29 working days from date of submission of its initial listing application to PSX and SECP.

Farrukh H. Khan, managing director and CEO of PSX, in his welcome speech said listing a company is a key step in wealth creation for the entrepreneur. The advantages of listing are many more than just wealth creation. They include enhancing a company’s brand and public profile; professionalize, attract and retain high quality HR; have greater financing options and allows entrepreneurs to share risk, and rewards with other investors.

As against some apprehensions and criticisms, good corporate governance that comes with listing actually protects the majority shareholder the most by helping to develop a large scale sustainable business, he said.

Historically the capital markets in Pakistan have remained small and underutilized by both the private and public sectors which has led to over reliance for funding on the banking sector, he said. “It can be said that our economy is running on one wheel”, he added.

No modern economy can function effectively without large and liquid capital markets. With the significant GoP borrowing requirements, this has resulted in crowding out of the private sector as well as high interest rates, he noted.

In response, SECP and PSX have taken a number of steps to ease capital raising from the markets. These include significantly streamlining the IPO process and timelines to 29 working days from receiving the complete application to listing on the Exchange, introducing the EIPO facility to help smaller investors who can also participate in IPOs even if they don’t have a brokerage account through the CDC, digitizing the listing application process for issuers and launching a portal for investors to access information about upcoming IPOs, he said.

During the daylong event, various sessions were conducted to discuss the country’s economic situation and progress at capital markets. A large number of people from government institutions, SECP, CDC, NCCPL, brokerage industry, banking and investment sectors and other stakeholders attended the event.

Copyright Business Recorder, 2024