The government of Pakistan has increased the rate of return on several national savings schemes. According to a notification from the Ministry of Finance, the rate of return on 10-year Defense Savings Certificates has been increased from 9.29 percent to 9.37 percent.
Additionally, the rate of return on Regular Income Savings Certificates has been increased from 8.64 percent to 8.76 percent.
The notification added that the rate of return on 6-month short-term savings certificates has been increased from 7.14 percent to 7.20 percent, while the rate of return on special savings certificates will remain the same.
It must be mentioned, interest rates will be maintained on Special Savings Certificates, Special Savings Account, Bahbood Savings Certificates, Pensioners Benefit Account, Shuhada Family Welfare Account, Savings Account, Short Term Savings Certificates (three months), and Short-Term Savings Certificates (12 months duration).
As per the notification, the increase in interest rate has been implemented from Thursday, the 17th June 2021.
This would attract investment in the government’s schemes.
Other similar initiatives
The capital inflow in Pakistan has been 29 percent higher during the 11MFY21 compared to the same period in the 11-month fiscal year 2020.
According to the SBP data, the remittances reached $26.74 billion in the 11MFY21.
Similarly, comparing the month of May 2021 to May 2020, the remittances went up 34 percent year-on-year reaching a high of $2.5 billion in May 2021.
This can be attributed to the Roshan Digital Accounts (RDAs), which were introduced by the State Bank of Pakistan (SBP) in an attempt to regulate remittances.
SBP also launched Naya Pakistan Savings Certificate with the aim of boosting the country’s economy by attracting foreign investments.
They are high-interest yielding sovereign investment certificates issued by the State Bank of Pakistan (SBP) for Foreign Currency Value Account holders (FCVA) and Pakistani Rupee Value Account holders (NRVA).
The Naya Pakistan Certificates can be equated with the US treasury bills, but if we compare the long-term returns on the investment, the investors will find NPCs much more attractive as the rate of return is much higher on Pakistan’s NPCs.
So, in essence, this has helped government increase Pakistan’s liquid foreign exchange reserve deposits which stand at $23.58 billion as of 4th June 2021.
— SBP (@StateBank_Pak) June 10, 2021
When the government came to power in 2018, the liquid foreign exchange reserves were at a low of $14.48 billion for the FY19, however, the remittances and the saving schemes have enabled the government to rebuild its reserves.
The finance minister in his budget speech on 11th June 2021 said that the government has enough reserves for three months of imports.
The success of increased reserves, along with prudent policies instilled confidence among the investors resulting in a much higher GDP growth than what was expected by the government itself.