KARACHI: The financial sector’s asset base increased by 27 per cent in 2023, mainly because of the banking sector’s investments in risk-free, high-yielding government securities, according to State Bank of Pakistan’s Financial Stability Review.
“While volatility in financial markets remained high, the financial sector, especially the banking sector, remained resilient and grew by 29.5 per cent during the review period,” FSR for 2023 stated.
According to the report, asset growth was mainly driven by investments in government securities, while bank advances to the private sector contracted because of stressed macro-financial conditions.
The review also highlighted that the macroeconomic environment remained challenging amid increasing inflation, weak foreign exchange inflows and pressures on Pakistan’s external account and local currency, and low business confidence, especially in the first half of CY2023.
However, the policy steps and regulatory interventions that were taken to address increasing imbalances coupled with securing of nine-month Stand-By Arrangement (SBA) from IMF helped enhance the macroeconomic conditions in the second half of 2023.
The report maintained the expansion of the banks’ balance sheets was mainly funded by deposits, which posted a 20-year high increase in a high return environment.
