Karachi, January 9, 2024 – Pakistan is grappling with a substantial decline in investment in saving schemes, as official data released on Tuesday by the State Bank of Pakistan (SBP) indicates a notable downturn for the period ending November 2023.
According to the statistics provided by the SBP, the investment in national savings certificates witnessed a stark drop of 8.37 percent, dwindling to Rs 2.08 trillion by November 2023, compared to Rs 2.27 trillion at the end of November 2022.
Analysts attribute this decline in investment in saving certificates to the record-high benchmark interest rate of 22 percent, making investments in the banking system more attractive. The allure of higher returns within the banking sector appears to have diverted investors from traditional savings avenues.
Moreover, the government’s concerted effort to promote financial transparency and curb unregistered investment schemes has played a role in dissuading investors from flocking to bearer saving certificates. The documentation drive aims to formalize all financial transactions, discouraging the use of unrecorded funds. This move, while crucial for enhancing financial accountability, has led to a dampening effect on new investments in certain savings instruments.
A breakdown of the investment data reveals fluctuations across various saving schemes. National Savings Centers saw a decrease from Rs 2,270,587.1 million in November 2022 to Rs 2,079,294.2 million in November 2023. Post Offices, which recorded Rs 4,035.8 million in November 2022, experienced a notable decrease to (-1,823.8) million in the corresponding period of 2023. Banks witnessed a decrease from Rs 104,617.5 million to Rs 84,756.3 million during the same period.
Among other notable declines, Defence Savings Certificates fell from Rs 447,268.7 million to Rs 414,047.8 million. Special Savings Certificates (Registered) decreased from Rs 320,609.1 million to Rs 288,800.4 million, while Regular Income Certificates witnessed a substantial drop from Rs 583,229.6 million to Rs 377,731.2 million.
However, it’s worth noting that not all saving schemes experienced negative growth. Behbood Savings Certificate saw a modest increase from Rs 1,018,609.2 million to Rs 1,031,659.8 million during the same period. Short-Term Savings Certificates (3 Months) increased from Rs 5,053.5 million to Rs 27,359.4 million, and Short-Term Savings Certificates (6 Months) rose from Rs 2,195.9 million to Rs 7,571.8 million.
As investors navigate the evolving financial landscape, the balance between attractive interest rates within the banking sector and the allure of various saving schemes will likely determine the future trajectory of investment patterns. The government’s continued commitment to financial transparency may reshape investor preferences, emphasizing the need for a nuanced approach to foster sustainable economic growth.
