RAWALPINDI, March 15: Adviser to the Ministry of Finance and Economic Affairs Dr. Ashfaq Hassan Khan has said that while the implementation of reforms in the banking sector continues, the government is now moving towards consolidating these reforms.
Country’s economy has now become resilient and quite able to sustain shocks, he said while referring to the earthquake of October 2005 and three-fold increase in oil prices in the international market.
While the economy is growing, challenges are also increasing. In an environment of shocks the challenge is big to sustain the economic growth, he said adding that a certain level of inflation was necessary for growth of economy.
Dr Khan was speaking at a seminar organised by the Institute of Bankers Pakistan (IBP) on ‘Emerging challenges in Pakistan banking, their effects on economy and role in nation-building’ held at the State Bank of Pakistan in Rawalpindi.
In his 90-minute presentation Dr. Ashfaq focused his address on consumer financing, saying that there was a direct link of the development of banking sector with the growth of economy. “Financial sector is the lifeblood of economy, and if it is bleeding, economy is weak,” he remarked.Referring to the presence of more and more foreign banks in Pakistan, the adviser said this investment was an example of confidence in economy. Dr. Khan made an analysis of the performance of Pakistani banks during pre-reforms period before 1988 when banking sector was operating on a very different mode following selected credit target.
The reforms shifted the operation of banking sector from selected control monetary policy to an era of open market competition. In other words, direct control of money supply has now been converted into indirect control supply, he said.
He said that reforms in the banking sector, which has brought a healthy competition will continue. As a result of reforms, the government has started to privatise banks in the public sector. Over 85 per cent of banks are now in the hands of private sector, while 100 financial institutions were in operation throughout the country, he said.
Dr Khan explained in detail the merits of consumer financing and said benefits of such financing had now been brought down to the level of common people resulting in the growing of consumer financing.
Explaining the fruits of consumer financing, he said it has brought change in the quality of life, growth of income and tax culture, picking up of industrial growth, creation of employment opportunities and many other benefits.
Dr. Khan also spoke on micro financing saying that these will bring changes in the life pattern of low income group. About four to five micro financing banks were operating while more are in the pipeline, he said.
Talking about inflation, he said a certain level of inflation was necessary for the growth of economy. The government’s monetary and fiscal policies are designed to contain the rate of inflation at certain level so that the economy and the people should remain unaffected, he said adding people should understand the difference between prices and inflation.
Taslim Kazi, chief manager SBP Rawalpindi, who is also director of IBP, spoke on aims and objectives of the institute and its programmes to develop human resources in the banking sector.