The key catalyst in the medium term will be new investments in critical infrastructure
The Pakistani economy has bright prospects ahead, as structural reforms under the IMF’s $ 6 billion program and new investments in power and trade infrastructure are expected to pave the way for sustainable growth in the years to come. said a top banker.
Zafar Masud, chairman of the Bank of Punjab, said the effective data-driven response to the Covid pandemic leading to effective management of smart locks has helped the economy weather the crisis. GDP growth accelerated to 4% in fiscal year 2020-2021, mainly thanks to record fiscal and monetary stimulus measures.
“The government is now targeting 6% growth over the next two years. However, targeted reforms will be needed to make growth more equitable and sustainable in the medium term. Indigenous reform agenda will remain the real game changer, ”Masud said Khaleej weather in an interview.
“Rich in natural resources and a growing young population located next to two of the world’s largest and fastest growing economies [China and India], Pakistan has always had a high growth potential. However, in the past the country has failed to live up to its growth potential due to a plethora of internal and external issues. All of this could change in the years to come due to key structural reforms that have been launched under the IMF’s $ 6 billion Extended Financing Facility and new investments in critical energy and trade infrastructure under the Fund. China Pakistan Economic Corridor of $ 46 billion, ”he said.
Why the economy has underperformed
Masud said Pakistan has underperformed regional economies over the past two decades, mainly due to security concerns and major structural bottlenecks, including crippling electricity shortages and a frequent balance crisis. payments.
“A key catalyst that will drive the economy towards a higher growth path in the medium term will be new investments in critical energy and trade infrastructure, primarily under the CPEC. As a result, the power generation capacity, at affordable prices, as well as the transmission, will be significantly improved and the improvements in road, rail, logistics and port infrastructure will significantly reduce the cost of doing business, ”he said. .
“Second, as a result of key reforms undertaken by the government over the past two years aimed at moving towards a market-based exchange rate regime, reducing significant tax exemptions, etc., we see a significant improvement in macroeconomic fundamentals. The current account posted a surplus in 2021 and the government has succeeded in limiting the build-up of high-risk external public debt, ”he added.
Finally, he said the main catalyst for improving the economic outlook is the effective data-driven response to the Covid pandemic.
“The government’s calibrated response has helped strike a balance between protecting lives and protecting livelihoods. The vaccination program has now started and the government aims to vaccinate more than 30 million people by 2021, which will be a critical success to ensure momentum for growth. “
High credit costs
When asked about the high cost of credit in Pakistan, he said this reflected weak fundamentals in the economy. A weak deposit base (45 percent of GDP) and large public borrowing over the past decade has led to crowding out of credit to the private sector (asset deposit ratio of 48 percent). Likewise, high borrowing costs in international markets reflect low international credit ratings and help keep domestic credit costs high.
“The key reforms undertaken are expected to improve economic fundamentals and will gradually lead to lower costs of credit, especially for the private sector. However, in the meantime, realizing this challenge, the government has introduced numerous concessional finance programs to promote financial inclusion and support access to credit in small and micro-enterprises / unconventional projects, ”he said. -he declares.
Roshan Digital Account
Masud said the Roshan Digital Account Program (RDA) will provide potential clients with an exclusive opportunity to open a remote account in Pakistan through a fully digital and online experience without visiting any branch in Pakistan. In addition, the RDA product will provide innovative banking solutions for people wishing to undertake banking, payment and investment business in Pakistan.
“Opening the account will only require a set of basic information and documents. This initiative has been a huge success in attracting unconventional remittances motivated by investments in the form of government certificates etc. BOP is the first bank to allow the opening of RDA accounts free of charge, which will make it easier to attract consumer-related remittances, mainly from non-bank channels, ”he said.
He said investment opportunities in the Pakistani real estate market, including commercial and residential real estate, are on the cards to be added to the bouquet of facilities offered under the GDR. “Once the central bank authorizes it, BOP will offer overseas Pakistanis the most competitive mark-up rates allowing them to realize their dream of owning a home,” he said.
To a question, he said that BOP offers a range of its own savings products at different time horizons in the low risk category, including government Naya Pakistan certificates offered for three, six and 12 month terms; and three and five years, with the most competitive rates of profit; Pakistanis overseas are strongly encouraged to invest in these.
In addition, the Pakistani stock exchange has been one of the best performing in the region and this also represents a very good investment opportunity depending on the risk appetite of the investor. Real estate will always remain a very good opportunity in the medium to long term investment positions, he said.
Serving Pakistanis Overseas
Masud said that banks play a critical role in efficiently allocating scarce financial resources, leading to higher productivity and growth. He said Pakistani banks are investing heavily in upgrading digital banking services, which have now become an essential requirement (no longer a luxury), focused on reducing the cost of doing business and improving the reach of banking services. to provide the most convenient banking services. to clients.
“We are the most active bank in the country to promote government concessional financing programs such as Kamyab Jawan and Punjab Rozgar. These programs will help foster much needed entrepreneurship among skilled and educated youth, especially in the IT sector, which poses a great opportunity to increase exports and enable access to finance in sectors that do not. have not been the conventional objective of financial institutions such as micro-SMEs and agriculture. These sectors will be the engine of real sustainable growth. “
“On top of that, and most importantly, we are the No.1 bank for affordable housing, which will have a far-reaching social and economic impact on the country, which will translate into sustainable and long-term GDP growth,” he added.
Explore international markets
Masud said BOP is seriously considering options to explore international markets, especially in the Gulf region.
“I see the Bank of Punjab poised to be in the Big Five over the next five years. We are developing our core business and playing a leading role in niche financing avenues. At the same time, we are strengthening our risk, compliance and audit functions, ”he said.
“We aim to strengthen the presence of our branches in strategic markets over the coming years. We have all the strategies for entering the international market in our medium term plan by investing in offshore banking units in Bahrain and the Dubai International Financial Center in the UAE. “
Regarding service to the overseas Pakistani community, he said the bank is already serving them by first offering free RDA facilities, coupled with a number of conventional value-added services in the space. field remittances and banking.
Foundation to improve passenger safety
Masud was also one of two people who survived the devastating PIA plane crash in May of last year. Pakistan International Airlines flight PK-8303 crashed in Karachi just before landing.
“It was indeed a horrific incident which resulted in the loss of 97 precious lives, including passengers and crew. Relieving the ordeal of the unfortunate plane, I found myself very fortunate to survive against all odds,” did he declare.
“I firmly believe that this was all due to the prayers of my family, friends and especially the whole nation, who were desperate for good news of this horrific accident, which occurred at the most uncertain peak time of the world. coronavirus. This incident has further strengthened my determination to work with more zeal and fervor for the well-being of our beloved country and my compatriots, “he said.
“Management through empathy has become my hallmark in life,” he said.
“To avoid such tragic episodes, I am setting up a foundation to improve the environment for the safety and security of passengers in all modes of transport,” Masud said.