KARACHI, Aug 15: Net withdrawals from National Saving Schemes (NSS) stood at Rs38.46 billion in the last fiscal year despite the fact that two tailor-made schemes generated more than Rs78 billion worth of fresh savings.
Ten-year Bahbood (Welfare) Saving Certificates (BSCs) attracted fresh investment of Rs60.6 billion whereas Pensioners Benefit Accounts (PBAs) of the same maturity raised Rs17.7 billion during fiscal year 2005 ending in June. But despite that net withdrawals during the year totalled Rs38.46 billion, data released by the State Bank show.
The reason why withdrawals exceeded fresh investment was that once-popular 10-year Defence Saving Certificates (DSCs) and five-year Regular Income Certificates (RICs) lost their charm in the last fiscal year due to dwindling returns. Three-year Special Saving Certificates (SSCs) became totally unwanted as investors made net withdrawals of Rs83.16 billion from this scheme; they also divested Rs8.7 billion worth of DSCs and Rs40.45 billion worth of RICs.
The rates of return on DSCs, RICs and SSCs stood at 8.15pc, 6.84pc and 6.95 per cent respectively in the last fiscal year — in each case lower than the annual average inflation of 9.28 per cent. But the rate of return on BSCs and PBAs was substantially higher at 10.08 per cent.
That explains why people made a huge investment of more than Rs78 billion in BSCs and PBAs in the last fiscal year whereas they divested heavily the stocks of DSCs, RICs and SSCs.
FUTURE OUTLOOK: As the government has increased the rates of return on NSS for July-December 2005, chances are that the pace of withdrawals would slow down in case of DSCs, RICs and SSCs and BSCs and PBAs would attract still larger investments.
Those who invest in NSS between July 1 and December 31 this year would earn 8.88pc and 8.6 per cent return on RICs and SSCs and 9.46pc return on DSCs. They will get even higher return i.e. 11.04 per cent on BSCs and PBAs.
But even the upward revised rates of return on NSS might turn out to be too low in real terms.
The government has set inflation target at eight per cent for the current fiscal year — and data released on Monday showed that July inflation was around 9pc. So, if inflation during the first half of this fiscal year i.e. between July-December 2005 remains anywhere between eight and nine per cent, the rates of return on DSCs, RICs and SSCs would be just too little.
However, the rates of return on BSCs and PBAs, investment in which is allowed only by senior citizens of 60 years or more, widows and pensioners, would be above inflation. And that should not only encourage the targeted class of investors to invest more in the two instruments but also enable the government to once again rely on NSS as a source of borrowing.
