ISLAMABAD, May 30: The government is contemplating a “sizable” reduction in return on National Savings Schemes (NSS) from next month, it is learnt.

A finance ministry official told Dawn on Friday that the domestic debt stood at around Rs1.8 trillion. The government, he added, could borrow at 1.7 per cent interest rate for its budgetary requirements but it was paying between 8.5pc and 11pc on various savings schemes.

“This is a big margin and has to be narrowed down,” said the official, but added it would be premature to say what would be the size of the proposed reduction.

The official, seeking anonymity, said the profit on NSS was linked to the Pakistan Investment Bonds and it was determined on the basis of two auctions of treasury bills plus a certain percentage of margin.

He said the last auction held in March fetched a 5.6pc rate. The next auction would be held in June and the average rate of two auctions would finally determine as to what should be the return on savings schemes from now onwards.

He said while it would not be possible for the government to cut profit on existing savings schemes because of social factors, it would have to contain the future return.