Muhammad Ali Jinnah, the founding father of Pakistan, once stated that: “Thrift as a national asset is going to play an important part in the building up of the state. So save and invest in Pakistan saving certificates”.
If first quarter of the current fiscal year is any criteria the Qauid’s countrymen, widely believed to have forgotten many of his precious sayings, are following their founding father’s instruction well.
The official data for July-September FY13 reveals that during the period under review the crises-hit Pakistanis managed to save over Rs 154 billion under the government-backed National Savings Scheme (NSS).
This amount shows a phenomenal growth of 184 percent or over Rs 100 billion when compared with the corresponding quarter of FY12 when the savings under NSS had been calculated at only Rs 54.298 billion.
A month-wise account of the savings reported by the State Bank reveals that during the first month of FY13, July, the NSS attracted a huge amount of Rs 27.284 billion as against Rs 19.200 billion in the same month of FY12. August and September were no exception with savers investing, respectively, Rs 64.369 billion and Rs 62.738 billion in various government papers under the head of NSS. Last year during these months the NSS had mobilized only Rs 10.786 billion and Rs 24.310 billion.
The analysts believe that this savings-prone trend could be of immense significance for the country’s ailing economy, had the saved amount been used by the cash-strapped government for development purposes.
Last fiscal year, FY12, saw the countrymen managing to save over Rs 242 billion despite a persistent backbreaking double-digit inflation.
The economists, however, warn that these savings are categorized by the government as an “unfunded debt” that has to be repaid to the savers with noticeable returns. During July-June FY12, the cash-strapped government garnered Rs 242.168 billion through selling its risk-free NSS certificates. This amount showed am increase of 3.0 percent or Rs 7.22 billion when compared with Rs 234.943 billion the government had raised in FY11. According to analysts, the funds-starved federal government would be repaying this Rs 242 billion with a profit of 20 to 40 basis points announced by the Central Directorate of National Savings (CDNS) in March this year. The current rate of return on NSS instruments, reportedly, stands at 11.87 percent on Special Saving Certificates (SSC), 12.12 percent on Regular Income Certificates (RIC), 14.28 percent on Behbood Saving Certificates (BSC) and Pensioners Benefit scheme, 12.33 percent on Defense Saving Certificates (DSC) and 8.40 percent on the NSS savings accounts. The economic observers, though positive towards the current upward trend in national savings, are critical of piling up of the heavily-indebted government’s liabilities for the retirement of which the latter was doing no provisioning.
“The money that come to the government through saving schemes is a liability and is called unfunded debts,” views Asfar Bin Shahid, a senior analyst.
But, the analyst believes, more worrisome was the fact that the government was using these debts without creating a separate fund that could ensure retirement of the borrowed money.
“Spending these unfunded debts without doing provisioning… is a dangerous thing,” A.B Shahid warns.
He says setting a sort of collateral for these unfunded debts by the government would also provide the investors with a confidence against his/her money. “It’s a kind of Confidence Building Measure that we are apportioning a certain amount to retire your debt,” says the analyst.
The provisioning against the unfunded loans, the analyst suggests, becomes easier when the maturity periods have been set in advance for these credits.
About usage of the NSS debts, the analyst said, ideally, every penny of the taxpayers’ money should be spent “optimally” for the development purposes, especially in the socio-physical infrastructure side.
“Increase in savings is a positive sign no matter where the money is being preserved or channeled into those sectors where it could generate economic activity,” Shahid opines.
A recent history of the government “unfunded” borrowings through NSS instruments shows that the saving certificates had fetched the government over Rs 224.767 billion in FY10, Rs 267.223 billion in FY09, Rs 86.639 billion in FY08, Rs 67.651 billion in FY07 and Rs 6 billion in FY06.
The investments in NSSs, which amounted to a meager Rs 6 billion in FY06, surged by over 1000 percent in FY07, over 28 percent in FY08 and over 208 percent in the recession-hit FY09 and then dipped by 15.8 percent in FY10. And, in FY12 a recovering global economy seems to have restored the investors’ confidence who bought saving certificates worth Rs 242 billion. On March 30, the federal government had marginally raised returns on various saving instruments under the NSS with effect from April 1 in line with recent increase in the yields of Pakistan Investment Bonds.
