Mobilise domestic savings to grow per capita income

Former State Bank of Pakistan (SBP) governor Dr Ishrat Husain said on Thursday it’d take 70 years for Pakistan to double its per capita income at the current rates of savings, investment and population growth. Speaking at the International InsureImpact Conference 2023 organised by the Securities and Exchange Commission of Pakistan (SECP), Dr Husain said the non-bank financial sector must step up to the plate and mobilise domestic savings to achieve better economic growth. As opposed to the banking sector, the share of the non-bank financial sector, which includes insurance and asset management industries among others, in the overall asset base has remained stagnant in the last 10 years, he said. “This is not the right direction. I would’ve expected the non-bank financial sector to grow a lot faster than banks,” he said. The investment ratio in Pakistan is about 15 per cent, half of neighbouring India’s. The Incremental Capital Output Ratio (ICOR) — which reflects the relationship between the investment made in an economy and the consequent increase in its GDP — for Pakistan is as high as four. In other words, a relatively high Rs400 worth of capital investment is necessary to generate Rs100 of extra production.