The State Bank of Pakistan (SBP) has issued today its flagship annual publication viz., Financial Stability Review (FSR) for the calendar year 2018. The Review presents performance and risk assessment of various segments of the financial sector including banking, non-banking financial institutions, financial markets, exchange companies, non-financial corporates and financial market infrastructure.
In addition, it discusses the possible implications of the appraised risks to the overall stability of the financial sector. FSR suggests that the CY18 has been a challenging year for the financial sector of Pakistan. The macroeconomic vulnerabilities emerging from twin deficits and elevated inflation level have necessitated the stabilization measures that have slowed down the pace of economic growth. The financial markets, particularly, the forex and equity markets have trended downwards with increased volatility. Accordingly, the growth of the financial sector has moderated to 7.5 percent in CY18. Similarly, the financial depth, as measured by financial assets to GDP ratio, has subsided to 73.0 percent in CY18 from 74.5 percent a year earlier. However, the financial institutions and financial market infrastructure have largely remained resilient and performed steadily during the year under review.
Among the financial institutions, banking sector has remained resilient, with strong Capital Adequacy Ratio (CAR) of 16.2 percent—well above the minimum regulatory level of 11.9 percent—and high fund-based liquidity.