ISLAMABAD, Oct 31: Ranking 58 out of 62 economies in the ‘Financial Development Index’ of 2012 and losing 3 points from its position of 55 in 2011, Pakistan shows weaknesses across the majority of the pillars in the index.
In addition, Pakistan has experienced relatively steep declines in both the commercial and retail access, thus facing tough challenges on developing its financial markets, says the ‘Financial Development Report 2012’, published by the World Economic Forum (WEF) on Wednesday.
Still, results of this year’s index indicate some signs of improvement, as “Pakistan’s jump in the financial stability pillar was primarily due to increased banking system ability,” the report notes.
Pakistan continues to show stability on the Financial Development Index of the World Economic Forum on the indicators; cost of closing a business, where the rank of 5 was maintained, also showing stability in frequency of banking crises and output loss during banking crises, Pakistan again secured the top rank among 62 economies; similarly on the public ownership of banks, which is a percentage of assets held by the 10 largest banks that is located in banks Pakistan’s ranking on financial index dips that are more than 25 per cent government owned, Pakistan again secured the top rank of 1.
The report also shows an improvement in the total number of active borrowers from microfinance institutions per 1,000 adults, where Pakistan has improved its position of 12 in 2011 to 9th in 2012. Pakistan has shown slight improvements on the strength of auditing and reporting standards, where it is ranked 48 in 2012 as compared to 52 in 2011.
On the pillar of legal and regulatory issues Pakistan has shown significant gains, by improving the burden of government regulations, securing 21 rank as compared to 32 last year. The regulation of securities exchanges has also improved 5 points with a rank of 37 out of 62 economies globally.
The current account balance to GDP, a variable, which is the three-year average of current account balance to GDP, indicates the difficulty Pakistan had in mobilizing the foreign exchange necessary for debt service has also improved from 53 last year to 40 in the current year.
The economy has also shown improvements in the “aggregate profitability indicator”, which is based on a three-year average of three measures of profitability: net interest margin, bank return on assets, and bank return on equity, this was measured on an average from 2008 to 2010, Pakistan improved 8 points on this, securing 41 rank on the Financial Development Index 2012.
Other area where Pakistan showed improvement of 14 ranks was the real growth of direct insurance premiums, where Pakistan stands at 30th rank.
However Pakistan showed discouraging performance on various key indicators, where it lost it development advantage on multiple factors, whereas; intellectual property protection (53) and effectiveness of law-making bodies (47) as compared to 48 and 43 from last year.
The distortive effect of taxes and subsidies on competition, which is to what extent does government subsidies and tax breaks distort competition, Pakistan lost its rank from 46 in 2011 to 53 in 2012.
In terms of Internet users, Pakistan has seen a decline in its internet penetration, where it lost its position of 54 to 61 as compared to 2011 and 2012 respectively.
On the external vulnerability indicator, which is the sum of several measures of external exposure as a percentage of foreign exchange reserves, Pakistan has lost an alarming 14 points and it stands at 20 in 2012. However Pakistan still maintains a development advantage in this area.
Whereas the world has shown improvements in the banking system, such as Tier 1 capital ratios and non-performing loans to total loans, Pakistan has declined in these two indicators, securing 26 and 57 out of 62 economies in 2012.