ISLAMABAD, Aug 16 (INP-WealthPK) The Ministry of Finance said the government is fully committed to providing competitive and market-based rates of return to small savers through the National Savings Schemes (NSS) to promote a savings culture in the country.

According to an official document of the ministry, a copy of which is available with WealthPK, in order to avoid distortion in the market, the profit rates on NSS are not fixed arbitrarily but are linked with the Pakistan Investment Bonds (PIBs) for medium and long-term instruments and with Treasury Bills (T-Bills) for short-term securities.

The ministry said currently, the NSS rates were fixed at 95% of PIB and T-bills of comparable maturities with the approval of the Finance Division. In order to respond to the upward or downward trends of interest rate in the market, the rates of NSS are revised on a monthly basis.

It said the government was providing special enhanced rates of return to specialized segments of the society including pensioners, widows, senior citizens, disabled persons, and families of martyrs (Shuhada) through offering a mix of NSS like Pensioners’ Benefit Account (PBA), Behbood Savings Certificates (BSCs) and Shuhada Family Welfare Account (SFWA).

It said these welfare schemes offered higher rates of return which were almost 2% over and above the return of the regular products of National Savings.

It further emphasized that National Savings is providing financial services to individual common savers and households without any explicit or hidden charges in order to promote a savings culture in the country.

The ministry further highlighted that the profit rates were periodically reviewed in consultation with the Finance Division and State Bank of Pakistan. It clarified that currently no decrease in profit of NSS had been made, but rather the profit rates of all NSS had been on an increasing trend since March, 2022, and the same have been increased through the previous three revisions of rates, with the most recent increase granted on June 03, 2022.

According to details, the profit rate of the Defence Savings Certificates for 10-year tenor has been increased to 12.40%; the rate of the Pensioners' Benefit Account/Bahbood Savings for 10-year tenor has been enhanced to 14.16%; the rate of Regular Income Certificates for 05-year tenor has been revised upward to 12.36%; the rate of Special Savings Certificates and Accounts for 3-year tenor has increased to 13.23%; the rate of running Saving Account has been increased to 12.25%; and the rate of Short Term Savings Certificates for tenors 03-month, 06-months and 12 months have been revised up at 13.68%, 13.96% and 14% respectively. These profit rates for NSS are effective from June 3, 2022.

The National Directorate of National Savings (CDNS) has fixed a savings target of Rs1.5 trillion for the current financial year, while the CDNS surpassed its annual target in the previous fiscal year, achieving Rs1,250 billion savings target till June 30, 2022.

A senior official of CDNS told the media that the government is working to increase new investment opportunities and promote digital investment through several new projects.

He said that the CDNS in collaboration with State Bank of Pakistan was developing digital Prize Bonds, which would be available through online electronic channels. He said the CDNS was also in process of launching its first Mobile App for online purchase and encashment of National Savings Schemes.

The ministry said CDNS is playing a vital role in mobilizing savings and promoting financial inclusion by extending the social security net to all the deserving sections of the society.

The purpose of National Savings is to sell government securities/debt instruments in shape of NSS to support the government to finance the fiscal deficit through non-bank borrowing.

The ministry said Pakistan remained trapped in a low-saving and low-investment situation, which had constrained its economic potential. It also said that the economic conditions were unable to attract investment – both domestic and foreign direct investment.

Also, it added, the average of Incremental Capital Output Ratio of Pakistan became much lower compared to other countries in the region. Further, low savings rate limits the volume of investible funds. In turn, low investments make the growth unsustainable. Therefore, the current savings and investment level is insufficient to boost the growth momentum.

Credit: Independent News Pakistan-WealthPk