KARACHI: The recent turmoil from the global trade war has created significant uncertainty, and the State Bank warns it may pose challenges to the national economy.

“The heightened uncertainty amid the recent wave of protectionist measures and its associated implications on global economic growth and financial conditions may also pose challenges for the domestic economy,” said State Bank in its annual report.

The SBP issued a Financial Stability Review (FSR) for 2024 on Thursday, praising financial institutions for their performance in bringing stability.

The report presents the performance and risk assessment of various segments of the financial sector, including banks, microfinance banks (MFBs), development finance institutions (DFIs), non-bank financial institutions (NBFIs), insurance, financial markets and financial market infrastructures (FMIs).

The report says the financial sector has witnessed a decent growth of 17.8 per cent in 2024, reflecting sound economic indicators supporting the financial system.

It also assesses the financial soundness of the non-financial corporate sector, which is a major user of bank credit.

According to the SBP report, macroeconomic conditions improved considerably during CY24, as reflected by receding inflationary pressures and consequent significant monetary easing, fiscal consolidation, stable rupee-dollar parity, pick-up in economic activity, and improved external account balance.

It added that amid a turnaround in the macroeconomic environment, financial market volatility subsided. The banking sector exhibited steady performance and maintained its financial soundness. The balance sheet of the banks expanded by 15.8pc in CY24. Both investment and advances drove the expansion in assets.

“Private sector advances witnessed a strong rebound, due to revival in economic activity, easing in monetary policy, and advances-to-deposit ratio (ADR) linked tax policy for income from government securities,” said the report, adding that this tax policy also dampened the deposit mobilisation, which further increased the banks’ reliance on borrowings.

Published in Dawn, April 25th, 2025