There is no misgiving about the economic concept that the higher the national savings rate of a country, the higher the likelihood of splendid economic growth is. Pakistan’s national savings rate has always been pretty dismal. Savings to GDP rate between 12% and 15% does not suffice for the economic growth of 7% which has become mandatory for Pakistan to move forward with the burgeoning population, dwindling exports, decelerating foreign exchange reserves and scarce financial resources. The endeavors in this regard in the past could be termed window dressing since they culminated with dismay. There are a deluge of instances across the globe where economies have done wonders in the wake of higher national savings rate. Some of them are that of Singapore, China, South Korea and Switzerland. Singapore’s national savings rate is around 50%. It is one of the foremost economies in the world. Its GDP size is $372 billion whereas GDP per capita is $65,627. China, the second largest economy of the world with GDP of $12 trillion has grown at average GDP growth of 10% per year over the period of many years. Its national saving rate is 47%. South Korea with a national savings rate of 36% is a robust economy. Switzerland, with a national savings rate of 34%, is one of the leading European economies.
One of the reasons for the economic might of China is its policy to promote saving culture. One source quotes as follows: ‘Saving trends in China, in particular, have received considerable attention in both policy circles and academic literature. China is notable not only because of the large size of its saving pool and its high saving rate but also because the composition of saving is broad: China’s household, corporate, and government saving have all seen large increases.
Pakistan must promote the concept of household saving which is the difference between disposable income and consumption. Pakistan has been going to various lenders and friendly countries for financial support which weakens the standing of a country in various ways. One simple and quick method in the prevailing circumstances could be a patriotic scheme. This scheme may be initiated by the government. Pakistan’s population is over 208 million and there are 6 family members in a family on average. Though over one third of the entire population lives below the poverty line, Pakistan could pull itself from the economic turbulence by following the concept of patriotic scheme which is that every Pakistani, for the sake of economic self-sustainability must deposit one thousand rupees every year in a patriotic scheme, to be handled by the government. The scheme must apply to every Pakistani right from infant to toddler to adolescent to youth to the elderly. The head of the family must ensure that one thousand rupees for each family are to be deposited in the patriotic scheme for which there would be no interest payment and the actual amount may be returned back to the depositor once the country has achieved economic self-sustainability. Accountability and transparency in this regard would be of core significance. The idea may seem a bit weird on the surface, however, it may save Pakistan from going to the lending agencies. Through this scheme Pakistan may generate around $ 2 billion dollars every year.
The saving culture has not grown in Pakistan since may be people underestimate the power of money that is within their grasp. This issue must be addressed not by arranging so-called seminars and conference ending up awarding shields to the speakers but by ensuring that people comprehend the future value of money and the secure financial future. It is essential to address the concept of ‘wealth effect’ as well which is once people begin feeling a bit more rich, they start saving a bit less. This is one of the issues with the middle class of Pakistan. This is the issue which actually has led to consumption-oriented approach in Pakistan which our fragile economy cannot stand at all. The more the savings, the stronger the national economy.
Reckless spending by the government in the past and squandering of resources have been an enormous detriment to the economy. The recent measures of austerity by the incumbent government, not at the cost of economic growth, may be lauded.
It is an undeniable fact that poor national savings are the primary reasons and impediment to growth in developing countries. When a country’s saving rate is low, it compels the government to beg for foreign investment which at times becomes a herculean job.
Inadequate domestic savings constrain investment as well as growth and make it mandatory to beg for loans, which is a detriment to the economy today and in the decades to come.