KARACHI: State Bank of Pakistan Governor Ashraf Mahmood Wartha called on the business community to accelerate the pace of investment to capitalise on the stability that the country achieved.
Addressing a gathering of members of the Pakistan Stock Exchange (PSX), investors, brokerage house representatives and bank presidents after performing the traditional gong ceremony, Mr Wathra said Pakistan’s economy had shown a marked recovery during the last two fiscal years, growing by over four per cent, after an anaemic rate of 2.8pc on average in the preceding five years.
He said macroeconomic stability had been a key feature of recovery and now is an opportune time to accelerate domestic investment to take it to the next level of robust growth.
“In the context of historically low interest rates, marked improvement in security conditions and energy supplies, and launch of initiatives related to CPEC (China-Pakistan Economic Corridor), this is an opportune time to invest in new projects,” he said.
“Budget deficit has been contained without compromising on indispensable public spending, foreign exchange buffers have crossed $20 billion for the first time and inflationary pressures are less likely to resurge anytime soon”, said State Bank Governor on Monday. Citing a recent analysis of non-financial companies listed at the stock exchange, the SBP governor revealed that overall the corporate sector was fairly liquid and possessed a healthy surplus of investable funds.
“What this tells us is that no major risks are in sight, which would undermine efforts in meeting our shared objective of achieving high growth, generating more jobs and moving further ahead on the development frontier,” he said.
He described the maturing of capital markets as a welcome sign for the private sector. He said that with the advent of a unified PSX, there is now a deep liquidity pool and national platform for domestic savers and investors to take advantage of.
Corporate entities could benefit from enhanced access to savings, which could be channelled into new projects and developmental activities. In addition, the integration facilitated regulators in monitoring of market activity, and allowed a greater degree of efficiency and transparency to be realised, he said.
Later, a detailed presentation, titled ‘Taking economic recovery to the next level: Role of the private sector’ was given by SBP’s Chief Economic Adviser Dr Saeed Ahmed.
The most conservative estimate of net surplus with the corporate sector, he said, was Rs446 billion (calculated as current assets net of current liabilities, without additional borrowing).
He said that some entities had parked their liquidity in Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). “This is disturbing as the corporate sector is looking to benefit from investing in risk-free government securities instead of investing in real economic activities,” Mr Saeed said.
The total investable resource, defined as twice the size of equity (based on assumption of debt-equity ratio of 2) with short-term investments, cash and near cash and excluding the total liabilities, turned out to be over Rs2.6 trillion, he said, adding that more than half of this potential lay in the energy sector alone. Some other major sectors include cement, textiles and autos.
“According to another definition of computing potential investable resources, which replaces total liabilities with total borrowings, the potential reaches over Rs3.7tr while the major sectors remain the same,” he said.
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