Financial sector assets to grow 27% in 2023: SBP

KARACHI: According to the State Bank of Pakistan’s Financial Stability Review, financial sector assets grew by 27 percent in 2023, largely driven by the banking sector’s investment in safe, high-yielding government securities.

“While volatility in financial markets remained high, the financial sector, especially the banking sector, remained resilient and grew by 29.5 per cent over the period under review,” the 2023 FSR said.

According to the report, the increase in assets was mainly due to investments in government securities, while loans to the private sector contracted due to tight macrofinancial conditions.

The review also highlighted that the macroeconomic environment remains challenging due to rising inflation, weak foreign exchange inflows and pressure on Pakistan’s foreign account and local currency, as well as low business confidence, especially in the first half of calendar year 2023.

However, policy steps and regulatory interventions taken to address rising imbalances, combined with the securing of a nine-month Stand-by Agreement (SBA) from the IMF, helped improve macroeconomic conditions in the second half of 2023.

The report said the expansion of banks’ balance sheets was mainly financed by deposits, which recorded the highest growth in 20 years, while profitability remained high.