Interview with Syed ShariqWaqar — economy analyst
Syed Shariq Waqar has got over 20 years of diversified professional experience both at national and international level in medium and large scale organizations.
PAGE: YOUR VIEWS ON SAVINGS CULTURE IN PAKISTAN:
SYED SHARIQWAQAR: There is a famous proverb ‘A penny saved is a penny earned’. On a general scale, the proverb has been religiously followed; however, as a nation we are following it in a way contrary to what it is teaching us. Pakistan stands amongst the countries with lowest savings-to-GDP ratio, standing at a dismal 13.1% in 2017 compared to the global and emerging economies average of 25.6% and 31.4% respectively. Resultantly, we have been bearing the repercussions of low savings in the form of slow economic growth, high unemployment, double-digit inflation and many other chronic issues. The low level of savings in our economy paints a very bleak picture of our country’s potential to grow in the long term as savings provide a major impetus to economic growth in the form of investments. Savings are always directly proportional to investment and investment, an essential driver of national income, highly depends on savings available in the economy. National savings equaled 13.1 percent of GDP against 14.3 percent last year. Domestic savings were recorded at 7.5 percent of GDP against 8.2 percent a year ago. The slight decline in savings may be due to lower profits on savings schemes.
PAGE: HOW COULD GOVERNMENT PROMOTE SAVING CULTURE IN RURAL AND URBAN AREAS OF PAKISTAN?
SYED SHARIQWAQAR: The ideal way to boost domestic savings in our economy will be to increase public savings. Public savings have been abysmally low in our country as the government has proved to be a major dis-saver. Huge fiscal deficits have been incurred by the government on account of its low tax collection and high current expenditures. The tax-to-GDP ratio has been too weak at close to 10% compared to global average of 14.0%. Furthermore, these deficits were mainly incurred to finance the current expenditure portion rather than the investment (development) expenditure. The deficits could have been indeed justified, had the government used it to finance investment expenditures which typically help in fostering economic growth. Hence, to enhance public savings, it is imperative for the government to narrow down its fiscal deficit by enhancing its tax revenues or by taking austerity measures.
PAGE: WHAT ARE YOUR VIEWS ON THE SAVING BY THE HOUSEWIVES AND CHILDREN?
SYED SHARIQWAQAR: Increase in national savings would be to concentrate on household savings as they carry a significant portion of national savings. The theme of consumerism has been evident in Pakistani lifestyle and our economic growth has primarily been driven by consumer-led growth. According to an addition of Economic Survey of Pakistan, an average consumer in Pakistan allocated PKR 91 out of PKR 100 to consumption expenditure, implying a marginal saving rate of only 9%, compared with over 30% during the period FY01-08. There is no harm in consumerism as long as it is at a sustainable level; however, beyond a certain level it is detrimental to economy since it gobbles out all the available savings. Thus, as individuals and a nation, we have to restrict our unnecessary expenditures.
The Pakistani nation has been distinguishing itself by its ruthlessness indifference and disregard for the future. The headline numbers indicate an economy in an abysmal state, but everywhere one looks, there are people shopping like there is no tomorrow. Lavish homes have become our symbols of distinction. The imports of textile, food and transport group amount to a significant figure. I am not saying that we should stop importing these items, but imagine even a 20% reduction in imports of these products can contribute 1% to the savings-to-GDP , huge savings to our foreign exchange reserves. We must stop crying in front of foreign donors/agencies for obtaining foreign aid.
PAGE: YOUR VIEWS ON THE BENEFITS OF SAVING CULTURE FOR THE ECONOMY OF PAKISTAN:
SYED SHARIQWAQAR: As a middle class Pakistani, I would say that the incentives for saving are not too high as a lower middle class person is forced to pay undue tax although his/her income does not fall under taxation umbrella., Also low savings cause soaring inflation which leaves the masses with no choice but to consume. The banking products, which are the most popular means of savings, offer returns that are insufficient to beat inflation. According to data provided by SBP, the average deposit rate on fresh deposits for the latest period stood at 3.7%, while the core inflation number was close to 4.7%. In such a negative real return scenario, an average Pakistani is better off in consuming today rather than saving for tomorrow. Mutual funds can, to a great extent address this problem by providing competitive risk-adjusted returns and purchasing power protection to the masses. However, there is a strong need to increase awareness of these products (through advertisements, seminars etc) in order to increase their retail penetration as majority of the population is not cognizant of mutual funds and its advantages.
PAGE: HOW COULD YOUTH BE CONVINCED FOR THE BENEFITS OF SAVING?
SYED SHARIQWAQAR: Save one rupee today and save Pakistan from “ONE DOLLAR FOREIGN DEBT” for better TOMORROW.