The government needs large financial resources as its expenditure is rising while its income is not going up as fast. Its outlay on security is constantly on the increase as the law and order situation worsens.

To make it worse, large bank robberies by organised gangs are becoming common. And to make it more complicated, the bank staff is often party to the crime.

In such a situation, large funds are needed when tax revenues are not enough. In fact there are reports of large- scale tax evasion particularly in the organised industry. Repeated attempts to check tax evasion have not been successful.

Large external assistance cannot come because of the complexities at home and deepening international financial crisis. And it is not easy to borrow far more from foreign governments because of the situational uncertainties at home. So the government has decided to raise funds though the sale of GDR’s of state-run companies particularly in the oil and gas sectors and the general public at home. But one distinction it is making this time is that it wants to give a better deal to the small lenders or savers. It is coming up with three saving schemes--- for three months, six months and one year---which will yield the same rate of return as available on treasury Bills and Pakistan investment bonds. The details of the scheme have not been divulged by the Directorate of National Savings nor the total amount to be raised indicated. But the returns on the deposits can go up to nine per cent which is a far better deal than given by the banks to the small depositors.

The governor of the State Bank Dr. Shamshad Akhtar has been advising the banks to give a better deal to the small depositors and promote domestic savings in a period of high inflation. But instead of giving a better deal to the small depositors, the banks have been giving higher and higher salaries and perquisites to their senior staff including several luxury cars at a time. Dr Shamshad Akhtar does not want to apply any penal tool to ensure better return on the small depositors.

The banks give higher returns on larger deposits and for long- term holdings but the small depositors get one fourth of what the banks charge for lending money.

The preference for providing consumer finance at around 15 per cent or CFS funds to the Karachi Stock Exchange brokers at 17-18 per cent in order to pocket large gains.

Pakistan has one of the lowest savings rates except for some African countries. It has certainly the lowest savings rate in South Asia. The reason for low savings is high inflation. One needs more and more money to lead a modest life. The high inflation has resulted in excessive depreciation of the rupee. India pays 39 rupees for a dollar, so the imported goods are cheaper in Indian rupees and costlier in Pakistani rupees quoted around 62 to a dollar.. In addition, foreign debt servicing goes up and that makes the budget more burdensome.

In the 1990s it was decided that the government would not make the State Bank of Pakistan print currency notes and lend it interest free to it. But what has been happening since then, the State bank charges six per cent interest on the loans given to the government and then the money is given as profit to the government by the State Bank. In effect, the situation has not changed a bit. Dr Shamshad Akhtar has been exhorting the government not to borrow from the State Bank in this manner which is highly inflationary. But the government borrowings exceeds Rs350 billion in the first eight months of the current year.

The government has been using the national savings organisation to borrow money. In a country where the average inflation is usually around ten percent, the return on small savings should be at that level and not far below, to encourage more of small savings.