Sectors that contribute fifty percent GDP yet fifteen percent deposits
Zafar Masud, along with his colleagues discovered that the three sectors that contribute more than 50% to Pakistan’s GDP, namely, real estate, agriculture and retail, yet they only contribute 15% to deposits.
Real estate: The real estate sector is a major contributor to the Pakistani economy, accounting for over 10% of GDP. It is also a major employer, directly and indirectly supporting millions of people. However, the real estate sector is also known for its high levels of informality and its lack of transparency. This makes it difficult to track the flow of money in the sector and to ensure that it is contributing its fair share to the tax base.
Agriculture: The agriculture sector is another major contributor to the Pakistani economy, accounting for over 20% of GDP. It is also a major source of livelihood for millions of people. However, the agriculture sector is also facing a number of challenges, including climate change, water scarcity, and land fragmentation. These challenges are making it difficult for farmers to make a profit and to invest in new technologies and practices.
Retail: The retail sector is a growing sector of the Pakistani economy, accounting for over 10% of GDP. It is also a major employer, directly and indirectly supporting millions of people. However, the retail sector is also facing a number of challenges, including the rise of e-commerce and increasing competition from foreign retailers. These challenges are making it difficult for traditional retailers to survive and thrive.
The fact that these three sectors only contribute 15% to deposits is a concern for a number of reasons. First, it suggests that these sectors are not putting enough money into the banking system. This reduces the amount of money available for lending to businesses and individuals, which can stifle economic growth and job creation. Second, it suggests that these sectors are not as profitable as they could be. This could lead to slower investment and innovation in these sectors, which could further dampen economic growth. Third, it suggests that these sectors are not contributing their fair share to the tax base. This could deprive the government of much-needed revenue to invest in public services and infrastructure.
This is a problem because it means that there is less money available for lending to businesses and individuals. This can make it difficult for businesses to grow and create jobs, and it can make it difficult for individuals to buy homes or start businesses.
Zafar Masud says that this is “where it hurts” because it is a sign of a weak economy. A strong economy is one where there is a lot of investment and lending. When there is a lot of investment and lending, businesses can grow and create jobs, and individuals can buy homes and start businesses.
The idea put forth here is that these sectors need to do more to support the economy by putting more money into the banking system. This would help to increase lending and investment, which would lead to economic growth and prosperity.
Zafar Masud, CEO – Bank of Punjab, engages with Nauraiz Rana – Economist, World Bank, and delves into Pakistan’s financial landscape, focusing on crucial topics such as the impact of devolution, the challenges of tax collection, and the potential for financial inclusion in the country.
Moreover, he offers a sneak peek into his forthcoming book, where he shares ten invaluable life lessons. Discover insights into Pakistan’s financial transformation and the wisdom to shape a brighter future.