Banks Urged to Boost SME Financing to Reach $60 Billion Export Ambition
January 15, 2025: Karachi: In an address at the State Bank of Pakistan, Karachi, Planning Minister Prof. Ahsan Iqbal drew attention towards the fundamental role of financial institutions in realizing the objectives of the URAAN Pakistan – National Economic Transformation Plan 2024-29. The meeting, a conclave of the presidents of major banks across the country, marks a significant step towards enhancing Pakistan’s economic framework and achieving sustainable growth.
Under the ambit of URAAN Pakistan, Prof. Iqbal highlighted the necessity for continuous and substantial financial backing to transition plans from mere paperwork to tangible success. He stressed that without robust financial support, programs risk remaining theoretical concepts.
The Planning Minister underscored the critical lessons from past economic endeavors which, despite initial promise, faded due to structural and political challenges. Drawing parallels with successful economies globally, Prof. Iqbal pointed out that sustainable growth in Pakistan has been hampered by recurring policy shifts due to political instability, inadequate export volumes, and a non-comprehensive tax implementation.
Prof. Iqbal detailed the critical economic indicators that have shown marked improvement under the current administration:
• The Karachi Stock Exchange has seen a monumental rise to over 100,000 points from a low of 30,000 points, indicative of robust investor confidence.
• Inflation rates have been curtailed from a staggering 38% to a more manageable 4.5%, significantly easing the cost of living pressures on the populace.
• Interest rates have been reduced from a high of 23% to 13%, thereby providing much-needed relief to both businesses and consumers.
Addressing the structural reforms necessary for sustainable growth, Prof. Iqbal emphasized the need to enhance the tax-to-GDP ratio, which presently lags at 9% compared to the 16-18% seen in more economically resilient countries. Furthermore, he identified the underutilization of human resources and health challenges as significant hurdles, citing the high prevalence of diseases like Hepatitis C, diabetes, and TB, and the alarmingly high rates of child malnutrition and out-of-school children.
Addressing the bank presidents, the Minister articulated a strategic vision to lead Pakistan towards an export-led growth model, emphasizing the importance of integrating sectors such as agriculture, manufacturing, IT, services, minerals, creative industries, and the blue economy into global markets. He detailed the need for a profound transformation in the banking sector to support SMEs, thereby boosting Pakistan’s export potential significantly.
To achieve the ambitious goal of increasing Pakistan’s exports to $60 billion, a significant uplift in the export contributions from small and medium-sized enterprises (SMEs) is imperative. The Minister emphasized that SMEs have the potential to contribute 40% to 60% of these exports if provided with adequate banking support. To this end, Prof. Iqbal called upon the banking sector to implement specialized financial products and services that cater specifically to the needs of SMEs. This includes offering enhanced trade finance facilities, more accessible credit options, and innovative banking solutions tailored to the unique challenges faced by SMEs in the export sector.
The meeting represents a critical juncture in Pakistan’s economic trajectory, underscoring a collaborative approach between the government and the financial sector to forge a pathway toward a robust, diversified, and competitive economy. The collective efforts are expected to propel Pakistan towards achieving its ambitious target of $60 billion in exports, setting a precedent for sustainable and inclusive economic growth.