Karachi, February 14, 2024 – In a significant economic development, Pakistan has experienced a notable 10.59 percent decline in investments in saving certificates issued by the Central Directorate of National Savings (CDNS).
Official statistics reveal that the total investment in these certificates plummeted to Rs 2.11 trillion by the end of December 2023, down from Rs 2.36 trillion recorded a year earlier.
This decline in investment is primarily attributed to the exceptionally high benchmark interest rate, which currently stands at 22 percent. Analysts believe that this elevated interest rate has made investments in the banking sector more appealing, diverting investors from the traditional avenues of saving certificates. The allure of higher returns within the banking system has evidently overshadowed the attractiveness of saving certificates.
Additionally, the government’s proactive efforts to promote financial transparency and crack down on unregistered investment schemes have played a pivotal role in discouraging investors from opting for bearer saving certificates. The ongoing documentation drive aims to formalize all financial transactions, discouraging the use of unrecorded funds. While this initiative is crucial for enhancing financial accountability, it has simultaneously led to a dampening effect on new investments in certain savings instruments.
Breaking down the numbers, it is evident that the investment in certificates issued by national saving centers has dwindled to Rs 2.04 trillion by December 31, 2023, compared to Rs 2.26 trillion reported a year ago.
Defense Saving Certificates, a popular savings instrument, saw a decline in investment, falling to Rs 409 billion by December 2023 from Rs 444 billion in the previous year. Similarly, Special Saving Certificates (Registered) witnessed a decrease, recording Rs 286.68 billion by December 2023, down from Rs 312 billion a year ago.
The downturn in investment extended to regular income certificates, which saw a significant drop to Rs 336 billion, compared to the Rs 580 billion recorded in the previous year. Other certificates issued by the CDNS also witnessed a decline, marking an overall trend of decreased interest in traditional saving instruments.
While these figures indicate a current shift in investor preferences, experts remain optimistic that the market dynamics will adjust as economic conditions evolve. The government’s commitment to financial transparency, coupled with ongoing efforts to stabilize interest rates, could potentially influence a resurgence in confidence among investors, leading to a recovery in the saving certificates market.
The recent decline in investment in saving certificates is a reflection of the changing economic landscape influenced by record-high interest rates and government initiatives aimed at fostering financial transparency. As Pakistan navigates through these economic shifts, the future trajectory of investment patterns in various financial instruments remains uncertain, with market dynamics expected to adapt to evolving conditions.
