Substantial: Savings mobilised by NSS up 50.9%

Amount to Rs66.11b during first quarter of ongoing fiscal year.

KARACHI:

Savings mobilised under the National Savings Schemes (NSS) in the first quarter of 2014-15 amounted to Rs66.11 billion, which is 50.9% higher than the savings mobilisation achieved during the corresponding three-month period of 2013-14.

In September alone, the amount of savings in a number of schemes under the NSS clocked up at Rs15 billion, which is 16.5% up from the comparable figure of Rs12.9 billion recorded in the same month of the preceding fiscal year, according to the latest NSS data.

Savings mobilised under the NSS in 2013-14 amounted to Rs206.98 billion, which was 46.3% less than the mobilisation of Rs386 billion recorded in 2012-13.

Economists believe that the decline in savings under the NSS in 2013-14 appears significant only because of the high-base effect. In other words, the notable decrease in percentage terms in savings mobilisation in the last fiscal year was a direct result of the unusually high savings recorded in 2012-13.

Savings mobilisation underwent a rapid increase in 2012-13 when it surged by a massive 105% to Rs386 billion from Rs188.3 billion in 2011-12.



NSS mobilisation in 2012-13 had increased substantially when interest rates declined after the SBP decreased the policy rate.

Afterwards, the central bank raised the discount rate twice by 50 basis points each in the first half of 2013-14 and then kept it flat at 10% for the rest of the fiscal year. This led to higher interest rates in the economy, thus resulting in slower mobilisation of savings under the state-run NSS during 2013-14.

Savings mobilisation under the NSS remained Rs267.2 in 2008-09, Rs224.7 billion in 2009-10, Rs234.9 billion in 2010-11, Rs188.3 billion in 2011-12, Rs386 billion in 2012-13 and Rs206.98 billion in 2013-14. This translates into a compound annual growth rate of a negative 4.9% per annum for the last five fiscal years.



The decline in NSS mobilisation in recent years is arguably a positive development for the country. Government borrowings under the NSS are categorised as ‘unfunded debt’ and should thus be minimised. Out of the government’s total domestic debt and liabilities of Rs11.3 trillion, the share of unfunded debt in the form of savings schemes was 19.4%, or Rs2.2 trillion, at the end of September.

The government revised the rates of return on various NSS with effect from October 1. Under the new schedule, Bahbood Savings Certificates now offer a return of 14.04% per annum while the interest paid on Regular Income Certificates is 12.3% per annum.

The government also withdrew the exemption of deduction of withholding tax last year on the profit of the investment of up to Rs150,000 in Defence Savings Certificates, Special Savings Certificates/Accounts, Savings Accounts, Short-Term Savings Certificates and National Savings Bonds.

It has also linked profit rates on major NSS instruments with the yield on the Pakistan Investment Bonds besides imposing withholding tax on profits and service charges/penalty interest on early redemption.

Published in The Express Tribune, October 29^th, 2014.

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