Karachi, January 5, 2024 – The Pakistan government has experienced a significant dip of 7.67 percent in the investment in registered prize bonds, according to data released by the State Bank of Pakistan (SBP).
The figures indicate that the investment in premium (registered) prize bonds has contracted to Rs 53.70 billion by November 2023, compared to Rs 58.16 billion recorded a year ago.
The introduction of registered prize bonds was a measure taken by the government to adhere to the Financial Action Task Force (FATF) conditions, aiming to combat money laundering and terrorism financing while promoting the documentation of the economy. In the initial years, these premium prize bonds gained popularity among citizens, witnessing robust investments. However, recent trends suggest a shift in investor preferences.
The decline in registered prize bond investments is attributed to various factors, including the government’s implementation of high-interest rates, making bank deposits more attractive due to their competitive profit returns. As a result, the once-popular saving schemes like registered prize bonds have lost some of their appeal.
Currently, the Central Directorate of National Savings (CDNS) offers two denominations for premium prize bonds – Rs 40,000 and Rs 25,000. The official data reveals a drop in investment for both denominations.
For the premium prize bond with a denomination of Rs 40,000, the investment has fallen to Rs 32.31 billion by November 2023, compared to Rs 35.25 billion a year ago. Similarly, the investment in the prize bond denomination of Rs 25,000 has diminished to Rs 21.39 billion by November 2023, down from Rs 22.91 billion recorded a year ago.
The change in investor behavior highlights the impact of interest rate policies on individual investment decisions. With the government’s efforts to maintain competitive interest rates on bank deposits, investors are now gravitating towards traditional banking instruments rather than savings schemes like premium prize bonds.
The decline in registered prize bond investments signals the need for continuous evaluation of financial instruments and government policies to attract and retain investor interest. Financial authorities may need to reassess the attractiveness of existing savings schemes to ensure a balanced and competitive investment landscape.
As the economic landscape evolves, it becomes crucial for policymakers to strike a balance between meeting international standards, as emphasized by organizations like FATF, and ensuring that domestic financial instruments remain attractive and competitive in the eyes of investors. The coming months will reveal how these dynamics play out and whether the government introduces further adjustments to encourage a resurgence in registered prize bond investments.
