Lowering national saving profit

Lowering national saving profit

The Central Directorate of National Savings has lowered the profit rates by more than 2 percent on all saving schemes, including Defense Saving Certificates, Behbood Saving Certificate, Special Saving Certificate and Pensioner Benefit Account. The decision runs contrary to the monetary policy which has set the bank interest rate at 13.25 percent, although the profit rates on various saving schemes were already lower by 1 percent as compared with bank rate.

In the previous PML-N government the profit rate on Behbood Certificate and Pensioner Account was 7.80 percent and on other schemes it was 6 percent. The logic presented was that lower bank interest rate and rate of profit on national savings will give boost to domestic investment which did not happen. On the contrary national saving to GDP ratio dropped from 13 percent to the lowest 8 percent. This time too the lowering of profit rate will have no favourable impact on the investment environment; rather it will slow down the flow of money to saving schemes both from people in the country and abroad. It merits mention that during 1980-87 the rate of profit on fixed deposits in Defense Saving Certificates, Behbood and Pensioner saving schemes was 22 percent which jacked up the national saving –GDP ratio to 15 percent although bank interest rate was 7-8 percent. But even then investment climate was fairly positive. Fear of further drop in profit rates will deter Pakistani immigrants, who have settled abroad, to purchase national saving certificates. Lowering of profit rate is not the primary driver for boosting investment.

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