Cesare Calari, Vice President, Financial Sector Operations, World Bank, stated this in a meeting with Finance Minister Shaukat Aziz here on Friday.
He said that financial sector reforms have made financial markets buoyant, encouraged micro-finance, consumer finance and inducted transparency in securities market.
The World Bank recognises the role played by the Securities and Exchange Commission of Pakistan (SECP) and hoped that as a pro-active regulator it would continue the reform agenda to make insurance and non-banking institutions vibrant to harness full financial potential of the country.
The World Bank offered its assistance for capacity building to make regulatory work of SECP and State Bank of Pakistan more effective so as to enable it to effectively implement second-generation reforms.
It also expressed satisfaction over growth in auto and mortgage financing and hoped that consumer financing would meet the needs of the growing middle class in Pakistan.
Finance Minister Shaukat Aziz recalled the challenges faced in implementing reforms and said that Pakistan has achieved initial goal of economic performance.
The government continues to focus on the reform agenda and is in the process of implementing second-generation reforms, which will be outlined in the forthcoming budget.
He said that successful issuance of Eurobond had introduced Pakistan in international capital market as an emerging economy and increased confidence of investors, fund managers and financial institutions.
The government is on the reform path and has achieved 85 percent privatisation in the banking sector.
It is also in the process of restructuring ZTBL and SME Bank. Similarly, the government is encouraging micro-finance to promote employment in the rural and urban areas.
He emphasised the role of State Bank and Securities and Exchange Commission of Pakistan in making banking and non-financial sector vibrant, transparent and customer-friendly.
The government, he said, was encouraging banks to aggressively launch new products to diversify their lending from customary asset based lending to cash flow lending.
Financial institutions are expected to be more responsive, and through improved management. They should broaden their product profile and service quality.
On fixed income instruments, Aziz said that Pakistan has introduced long term local currency debt to lengthen the yield curve for government securities. As a result of these reforms, he said, the liquidity profile of the banks has improved, interests rates have reduced, consumers lending is picking up and mortgage finance especially housing is expected to become a major driver of economic growth.
On non-banking reforms, Finance Minister stated that investment banking is being encouraged to enter merger and acquisition, corporate finance and advisory services.
Development of fund management business is a key priority as this would develop capital markets, improved pension plans and provide alternate saving products.
All these reforms have inducted transparency as most of the financial sector is listed on the stock markets.
Similarly, capital markets have become more buoyant and proactive, notwithstanding the government needs to encourage reforms in insurance sector, especially life insurance to tap its full potential.
Recently, health insurance has been introduced and more competitive products are in the pipeline to create competition in the insurance sector.
He said that the government was working on various options to leverage savings of pensioners through innovative methods and reforms in Pakistan's pension programme.
The State Bank governor and senior officers of the Ministry of Finance attended the meeting.