Karachi, March 14, 2024 – In response to challenging economic conditions, bank deposits held by salary earners have surged by an impressive 25 percent, reaching a staggering Rs 3.77 trillion by the end of February 2024, according to official data released on Thursday.
Comparatively, the bank deposits of salary earners stood at Rs 3.02 trillion by the end of February 2022, as reported by the State Bank of Pakistan (SBP).
Financial market experts attribute this significant increase to the allure of higher interest rates, which have incentivized salary earners to deposit their savings in the banking system in pursuit of attractive returns.
The SBP has maintained the benchmark policy rate at 22 percent, the highest in the region. Notably, the central bank has substantially raised policy rates by 1500 basis points, from 7 percent in August 2021 to 22 percent in February 2024.
The surge in banking deposits has had a noticeable impact on saving schemes in the country. Pakistan has witnessed a substantial decline of 12 percent in investment in saving certificates during February 2024 compared to the same month a year ago.
As of the end of February 2024, total investment in certificates issued by the Central Directorate of National Savings (CDNS) amounted to Rs 2.07 trillion, marking a notable decrease from the Rs 2.35 trillion recorded in February 2023.
Official data further revealed that bank deposits in Pakistan have reached an unprecedented high of Rs 27.89 trillion by the end of February 2024.
This remarkable figure represents a substantial jump of 22 percent compared to the Rs 22.97 trillion recorded at the same time last year.
The growth trajectory continued into February 2024, with deposits increasing by 1.27 percent compared to the Rs 27.54 trillion recorded in January of the same year.
The allure of higher interest rates is considered a primary driver behind this surge, with businesses opting to secure their capital in bank deposits as a safer and more stable option within the current economic climate.
The impact of elevated interest rates is evident in the cautious approach adopted by many businesses, prioritizing capital preservation over riskier investment strategies. This conservative stance reflects the prevailing economic conditions and the desire for financial stability in uncertain times.
As Pakistan navigates through economic challenges, the significant increase in bank deposits underscores the confidence of salary earners and businesses in the banking system’s stability. However, it also highlights the need for comprehensive policies to address broader economic issues and promote sustainable growth in the long term.
