26 June 2004	Saturday	07 Jamadi-ul-Awwal 1425

KARACHI, June 25: The government plans to raise Rs36 billion through two tailor-made investment schemes for senior citizens, pensioners and widows in the next fiscal year, according to the documents of the budget for 2004-05.

In the next fiscal year, the government plans to generate Rs20 billion through Bahbood (welfare) Saving Certificates and Rs15 billion through Pensioners' Benefit Accounts.

The first scheme is for widows and the second is for retired government, semi-government employees as well as for senior citizens above 60 years of age. Both the schemes are of 10 years' maturity and carry an annual return of 10.08 per cent that is adjustable after every six months. The next revision of the rate is due in July.

During the first nine months of this fiscal year, the government raised 24.5 billion through these schemes: Bahbood Saving Certificates netted in Rs13.3 billion and Pensioners' Benefit Accounts Rs11.2 billion.

The government estimates that at the end of this fiscal year on June 30, total investment in these two schemes will reach Rs29.1 billion, of which Rs15.1 billion would be parked in Bahbood Saving Certificates and Rs14 billion in Pensioners' Benefit Accounts.

In the next fiscal year, the government expects a higher investment in the two schemes as it has increased the limit of individuals' investment in them from Rs1 million to Rs2 million. Besides, the government has decided that the deposits in the five-year Regular Income Certificates can be converted into Bahbood Saving Certificates and Pensioners' Benefit Accounts. Profit earned on these schemes is already exempted from withholding tax.

Regular Income Certificates currently carry an annual return of 6.96 per cent, which will be revised in July, along with the rates of return on all other instruments of the National Saving Schemes (NSS).

Since there is a huge difference between the rates of return on five-year RICs and 10-year Bahbood Saving Certificates and Pensioners' Benefit Accounts, the government is rightly anticipating that part of the fund being withdrawn from RICs will be reinvested in the later schemes.

During the first nine months of the current fiscal year, people withdrew Rs35.1 billion investments from RICs. The government had initially estimated maximum withdrawal of Rs23.7 billion. But it is now anticipating that total withdrawal from RICs will go up to Rs45 billion during this fiscal year. Keeping this trend in view, the government has projected maximum withdrawal of Rs40 billion in the next fiscal year.

The budget documents show that the government is also anticipating Rs10.95 billion withdrawal from three-year Special Saving Certificates in the next fiscal year. In nine months of this fiscal year, people withdrew Rs10.2 billion from SSCs that currently offer an annual return of 7.16 per cent. The government anticipates that total withdrawal from SSCs may reach Rs10.98 billion at the end of the fiscal year.

Unlike in RICs and SSCs, the government is expecting a modest inflow of Rs5 billion in ten-year Defence Saving Certificates in the next fiscal year. In the first nine months of this fiscal year, net investment in DSCs totalled Rs3.82 billion.

The government believes that this amount may shoot up to Rs5.1 billion by the end of the current fiscal year. Currently DSCs yield an annual return of 7.96 per cent.