May 2 - 15, 2011

Pakistan with a population of 180 million plus is essentially required to feed its population by generating business activity that is the answer to all economic ills and without growth we can not move forward even an inch.

This was stated by Aqeel Karim Dhedi, Chairman AKD Securities (Pvt) Limited in an interview. Aqeel Karim Dhedi, one of the top leaders of the capital market, while commenting on the prevailing economic and financial crisis recalled that from 2004 to 2007 there was no problem as every year we had achieved growth, but now for the last three years from 2008 to 2010 we consumed all development fund, we failed to generate revenue or attain growth.

AKD rubbished the idea of increasing the interest rate and questioned those who are advocating for higher interest today that why they kept the interest rate low when they were at the helm of affairs. Actually, those supporting high interest rate are misleading the government to avoid economic growth during the tenure of the present government. He cited the example of the developed economies where the inflation was on its peak but the interest rate was at zero just to keep on pumping money into the system with a focus to generate business and economic activity.

He said that in 2008 when the financial turmoil hit the US economy they brought down the interest rate at zero and they were not bothered about rising speculation and commodity prices. Actually if the public spending is stalled or checked through high rate of interest the country may be suffering from deflation rather than inflation, he sounded a note of warning. The secret of getting out of the present economic crisis is to make growth based policies.

The capital market is not getting momentum of growth for various reasons. Though the government on its part is supporting exceedingly time to time for the growth of the market yet the negative role of the regulators impairing the efforts for growth are creating depressive conditions at the capital market.

He pointed out that the central bank has never come out with the policies aimed at boosting growth of the market.

Despite outstanding support extended by the government, the current and cross currents of the political issues hamper growth due to one reason or the other. For example, he recalled the issue of capital gain tax that caused stir among the investors. Certainly, the capital gain tax must have been levied in many countries. It is not levied in many countries because their markets not perform and do not grow up so strong financially to bear the burden of the tax and perhaps Pakistan's is one such market that has yet to grow up. Actually, capital market is a broad based concept which encompasses various financial segments including debt market, equity market, commodity market, and they all are the components of the capital market. In our case we have an equity market which we desire to convert into a capital market in real sense. Though we could not succeed in achieving the goal yet we are keeping on our efforts in that direction for promoting the debt market in Pakistan.

The Asian Development Bank (ADB) has contributed significant funds for reforms in Pakistan as a result of which Security and Exchange Commission (SECP) came into being in the country. The funds required for creation for SECP were not fully reimbursed. The purpose of the reforms has not been achieved so far due to shortage of funds while no fund has been given for the development of the equity market as well. Had that money paid, the performance of the equity market would have been quite different from what it is today, he remarked.

AKD was of the view that whenever some sort of crisis struck the stock market all around the world, it is the responsibility of the government to come to the rescue of the market and support the equity market. Traditionally speaking the central bank takes the lead to protect and support the equity market all over the world but it is quite reverse in our case. Though the government does support the capital market, yet the central bank has not taken any initiative or step to support the equity market in Pakistan.

AKD recalled the financial crisis of 2008 when every government supported their respective equity markets and pumped money into the system while Pakistan was the only example where the equity market was virtually bashed by the regulators including the central bank, he regretted. Moreover, the bankers cancelled the lending of the brokers as the last nail in the coffin. After giving a cold shoulder by remaining indifferent to the problems faced by the equity market, they sprinkled salt on the wounds by initiating enquiry into the reasons for crisis.

He did not say much about the role of SECP. AKD came out with a prompt remark that actually the issue of liquidity is directly related to the central bank not with the SECP as the equity market frequently faces liquidity issues. Since the bank deals with the liquidity issues, the central bank is responsible to resolve liquidity issues. We are not saying that only equity market was damaged, other segments of the financial sectors such as Modarbas, investment banks, leasing companies etc were also damaged. In fact, majority of the instruments of the financial market were damaged and it is the bank, which regulate them. The central bank reduced SLR and CLR which was beneficial to the big four five banks only and not in favor of the common per son any way, he remarked.


AKD apparently had a soft corner for the government's keen support and efforts for improvement in the performance of the equity market with a theme of public-private partnership. To promote debt market, there is a need for new listings, investment in the capital market. The government is already focusing and working in that direction.

AKD strongly recommended to the government not to entirely depend on the banks alone. Investing in T-bills alone will not help economic growth; the government should borrow directly from the public. He also pointed out that the returns are given by the banks to the depositors are not significant in view of the mounting inflation. If these steps are taken, it would help a lot in curtailing and containing the debt servicing and ultimately the government would benefit directly of these steps.

At the moment, the government is engaged with budget preparation for financial 2011-12 and it is hoped the policymakers would keep in their mind to evolve policies to promote and strengthen the capital market.


The government has to cut the interest rate to achieve economic growth. He is of the view that it is the affordable financing that helps generating economic activity and generating employment. Price hike is a non-issue because price hike hits only when you have no business or economic activity, it is a concern of the joblessness. If you are earning and doing business, price hike becomes secondary. The first priority is to provide and produce jobs to the people. The business activity grows only when the interest rate is kept at low level. He pleaded that when business activity increases it ultimately helps to solve unemployment problem.