KARACHI: State Bank Governor Jameel Ahmad has said banks need to diversify beyond the government sector and increase financial deepening, stressing that no country can achieve sustainable economic growth with low levels of private credit.

Speaking at the Pakistan Banking Summit on Tuesday, Mr Jameel said banks’ credit to the private sector as a percentage of GDP declined to 8.4 per cent by fiscal year 2024 — almost half the level seen in 2004. Pakistan’s bank deposit- and private-sector credit-to-GDP ratios have also remained among the lowest compared to peer countries, he added.

Countering the common argument that government lending has crowded out the private sector, Mr Ahmed noted that in some countries, despite equally high or even greater government borrowing from commercial banks, the private sector still holds a significant share of the financial sector’s portfolio.

Pakistan’s banks allocate around 74pc of their lending to established sectors, while only 5pc goes to small and medium enterprises (SME). This imbalance highlights the need for banks to reassess........

© Dawn Business