In a concerning development for Pakistan’s financial landscape, data released by the State Bank of Pakistan (SBP) reveals a notable 4.8 percent decline in registered prize bond investments by the end of February 2024 compared to the same period the previous year.
According to official statistics disclosed by the SBP, the investment in registered or premium prize bonds stood at Rs 54.10 billion by the conclusion of February 2024, a decrease from Rs 56.34 billion recorded in the corresponding month of the preceding year.
The Central Directorate of National Savings (CDNS), in collaboration with the State Bank of Pakistan, introduced a novel registered prize bond scheme on March 10, 2017, known as “Premium Prize Bonds (Registered),” operating alongside the traditional bearer National Prize Bonds Scheme. Differing from bearer bonds, Premium Prize Bonds (Registered) are issued in the investor’s name.
These bonds function based on both profit and prize money. Investors receive biannual profits on their investments in the scheme and also stand a chance to win prizes, contingent upon adherence to shut period requirements. Presently, the public has access to one denomination of Rs 40,000 premium prize bonds.
The primary objective behind the introduction of premium or registered prize bonds was to foster a documented economy in Pakistan. This initiative aligns with broader government efforts to promote transparency and accountability in financial transactions.
In a series of measures aimed at restructuring the national prize bond landscape, the government announced the discontinuation of circulation for various denominations. On June 24, 2019, it was decided to cease the circulation of Rs 40,000 denomination national prize bonds. Similarly, on December 10, 2020, the discontinuation of circulation for Rs 25,000 denomination prize bonds was announced. In April 2021, the finance ministry declared that national prize bonds with denominations of Rs 7,500 and Rs 15,000 would no longer be sold.
While the circulation of bearer prize bonds has been halted by the government, the decline in registered prize bonds may be attributed to the higher interest rates maintained by the SBP in the country. Banks are enticing individuals with elevated rates of return on their deposits, often surpassing the returns on investment in registered prize bonds.
The decrease in registered prize bond investments underscores the dynamic nature of Pakistan’s financial market and highlights the challenges policymakers face in balancing the allure of traditional investment instruments with the evolving preferences of investors in an increasingly competitive financial landscape. As stakeholders navigate these shifts, attention to fostering investor confidence and promoting financial inclusion remains paramount for sustainable economic growth.
