Review of Pakistan's saving schemes.

• Author: Kazmi, S. Kamal Hayder

Byline: S. Kamal Hayder Kazmi

Various economists urged that the association between savings and economic growth is not only a significant but also a controversial issue for both policy makers and academicians. They have also examined that this phenomenon as cause and effect relationship. It is also believed that savings affected the economic growth because higher savings led to capital accumulation, which in turn led to economic growth in any country.

Moreover, studies suggested that over the last two decades, much of the differences in economic presentation between Pakistan and the rapidly growing Southeast Asian countries were due to the low rates of savings and investment in Pakistan. Hence, it was emphasized that difference in the growth rate of developed and developing states was basically due to the difference in savings rates.

World Bank consequently, has asked the developing states to adopt strategies which were conducive to savings in order to grow the economic growth. Many economists also recorded that savings is one of the key determinants of economic growth of Pakistan.

Central Directorate of National Savings (CDNS) in Pakistan remained in the process of restructuring and transformation during FY2019. In July 2019, the present Government of Pakistan raised profit margins on all national savings schemes by up to 2.3 percent to bring the NSS rates in line with recent hike in the central bank 's interest rate. Statistics also showed that pensioners' benefit account, Behbood savings certificates, and Shuhuda's family welfare account has been raised by 48 basis points to 14.76 percent per annum from 14.28 percent in January 2019. This translates into a profit of Rs61.50/month on minimum purchase of Rs5,000 Behbood savings certificates with effect from this month.

Statistics also showed that the Defence Savings Certificates went up 54 basis points to 13.01 percent from 12.47 percent since January 2019. Pakistan 's economists also explained that the national savings schemes rates are linked to the State Bank of Pakistan (SBP) benchmark interest rate and its subsequent impact on the long-term Pakistan Investment Bonds. In July 2019, SBP in line with market expectations has increased the interest rate by 100 basis points to an eight-year high of 13.25 percent over apprehensions of rise in inflation, mainly in the first half (July-December) of FY2019-20. It had taken the initiative to address the inflationary pressures from higher...