Saving schemes profit rates revised by the government

The government has reduced the returns on various national saving schemes and certificates by up to 1.22 percentage points, further dampening the already low domestic savings rate in Pakistan.

According to data from the Central Directorate of National Savings (CDNS), the return on the Sarwa Islamic Term Account has been slashed by 1.22 percent from 17.58% to 16.36%, while the profit rate on the Sarwa Islamic Saving Account was reduced by 1 percentage point.

The decline in savings rates is closely tied to the declining yields on government debt securities such as Treasury bills, Pakistan Investment Bonds, and Sukuk. CDNS reinvests funds from national savings schemes into these government debt instruments, making it less attractive for individuals to save.

Pakistan’s investment ratio has plummeted to a 50-year low, falling to just 13.1% of GDP in FY24, significantly lower than that of neighbouring countries. The reduction in savings rates is expected to exacerbate this trend.

Other adjustments made by CDNS include reducing the return on Short-Term Savings Certificates by 68 basis points, Special Savings Accounts by 30 basis points, and Regular Income Certificates by 12 basis points. However, profit rates for Behbood, Shuhda, and Defence savings products remained unchanged. The decline in savings rates coincides with a downward trend in returns on government debt instruments, which have seen reduced yields following a series of interest rate cuts by the central bank. The State Bank of Pakistan has lowered its key policy rate by a cumulative 4.50 percentage points over the past three months, bringing it to the current level of 17.5%