Pakistani economy faced severe imbalances in 2022, country’s central bank says

Pakistan’s central bank, the State Bank of Pakistan (SBP), has said that the country’s economy experienced severe imbalances in 2022. Publishing the annual Financial Stability Review for 2022 on Friday, the SBP stated that existing problems were exacerbated. by an unfavorable external environment.

However, he maintained that the performance and resilience of the financial system remained strong during the year. The annual report said that domestic headwinds, including twin deficits, high inflation, catastrophic flooding, the delay in the completion of IMF program reviews, as well as global challenges such as an accelerating rise in prices of raw materials and monetary tightening by the main central banks. in advanced economies, manifested in the deterioration of macroeconomic conditions.

GDP growth at 0.29%

According to the Financial Stability Review, the SBP and the government have taken several policy measures to address the growing imbalances. The measures include additional increases in the policy rate and macroprudential policies related to consumer financing and administrative measures to contain the external imbalance. As there was a notable slowdown in deposits, central banks’ reliance on lending remained substantial, the report added.

‘As a result, the current account deficit improved towards the end of the year while economic momentum weakened. In this context, the gross domestic product (GDP) grew only a meager 0.29% in fiscal year 23’, he stated.

Some sectors under pressure

The stability review indicated that microfinance banks remained under stress as asset quality metrics deteriorated along with after-tax losses. The report reveals that the non-financial corporate sector posted a moderate decline in profits due to heightened economic stress and an increase in financing costs and taxes.

However, the report says that the overall financial condition of the top 100 publicly traded companies “remained stable and the corporate sector generally continued to meet its obligations to financial institutions.”