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Review of Pakistan’s saving schemes

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 month-on-month headline and core inflation outturns and rupee depreciation.

The Government of Pakistan proclaimed the rates of National Savings Schemes after every 2-month. It was the 6th raise since June 2018. Likewise, return on Regular Income Certificates has been raised by 96 basis points, with the new rate of profit standing at 12.96 percent from 12.0 percent previously. This will translate into a payable profit of Rs 540/month on Rs 50,000 denomination. Statistics also showed that an average profit payable on special savings certificates (registered) / accounts went up by 1.33 percent to 12.90 percent from 11.57 percent (average) at the start of the calendar year. Also, the return on short-term savings certificates with 3-12 month tenure was raised by 2.3 percent to 12.08 percent from 9.80 percent. It is also noticed that the profit rate on savings accounts would now be 10.25 percent, up from 8.50 percent. This facts show a rise of 1.75 percent. Some achievements were made through CDNS in the 9-months and initiatives in the pipeline. CDNS, being the foremost institution offering the avenue to general public to park their savings has been able to not only attain the targets assigned but also surpassed by a big margin. During April 2019, the CDNS has attained 213 percent of the gross and 191 percent of proportionate targets.


Initiatives in the Pipeline:

  • Shariah Product of National Savings: According to the economic survey FY2018-19, there was a persistent demand of Shariah-compliant product and CDNS has responded to it and has developed its first-ever Shariah-compliant product called Sarwa Islamic Savings Account (SISA) for those who desire to invest only in the Shariah-compliant scheme of CDNS. The draft rules for it have been printed in the Gazette of Pakistan and after approval of the Cabinet Committee for Disposal of Legislative Cases (CCLC) and the Federal Cabinet, the proposed SISA Scheme will be introduced across the country.
  • Overseas Pakistanis Savings Certificates (OPSCs): Economic survey FY2018-19 also mentioned that the Pakistani diaspora abroad wanted to have a secure investment channel for their savings while the government, in order to raise more also looked for bringing remittances into formal money channels which were mostly coming via informal channels. In this regard, to fill the void, OPSCs has been designed as a product through CDNS to be introduced for Overseas Pakistanis only. It will be introduced originally in the Gulf Cooperation Council (GCC) market and then other states. The agreement has been almost finalized. Being a scripless security, OPSCs will be offered in both the US$ and rupee currencies. It is predicted that they will be introduced during FY2019-2020.
  • Launch of Rs. 100,000 Premium Prize Bond (Registered): Our economists also mentioned in the survey FY2019 that after successful launch of Rs.40000, premium prize bond (registered) national savings is in the process of introducing another registered prize bond for Rs. 100,000.
  • Scripless issuance and introduction of registered Prize Bonds amongst all denominations of Bearer Bonds: In collaboration with SBP, national savings is in the process of introduction of registered scripless prize bonds amongst all denominations. The registered prize bonds will be a step towards documentation of the economy while providing facility to the general public.
  • Debit Card Launch & Membership of 1Link System: In near future national savings is introducing ATM debit cards with the support of the Karandaaz Pakistan.

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