The State Bank of Pakistan Governor Reza Baqir said that Pakistan has the lowest saving rate in the region.
He said, “The real return on savings accounts currently is zero; anyone who has a savings account is getting 11-12% return whereas inflation right now is 12%.”
Baqir was interacting with the American Business Forum members. He said that the saving rate is essential for Pakistan as it is a huge reason due to which Pakistan is facing the balance of payments problem.
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Baqir said, “If we have to finance a higher rate of investment, then we either have to borrow from abroad or domestic pool of savings. This is the reason why we habitually have the balance of payment problems because our savings are not enough to meet our investments.”
Adding, “How can one expect people to save when they are getting zero return in actual, this has triggered informal means of savings by people like in the real estate sector, which we now want to bring under the banking network.”
He said for the last few years the State Bank of Pakistan has been facing may problems like the falling level of the foreign currency reserves and trying to deal with the external position that is hard to manage.
The governor said, “We now have more space as we have managed to fix fiscal reforms, our reserves are increasing and now we don’t need to worry about the crisis. We are now turning our attention towards structural areas and are pushing very hard our agenda of financial inclusion, particularly through fintech.”
He said that the economy of Pakistan will grow at a 3.5% rate this fiscal year.
Addressing the fluctuations in the exchange rate and inflation he said, “The tough part has already been done. We take difficult and non-popular decisions, our strategy was to give bad news as early as possible since bad news in installments makes it hard for the people to get optimistic about the future.”