KARACHI: The government has increased the profit rates of the National Savings Schemes (NSS) in the wake of the record record-high interest rate to tame unprecedented inflation.

The new rates will take effect from May 9. The details show that the NSS rate on three-month certificates was increased by 92 basis points to 20.84pc. This is just close to the SBP’s policy interest rate of 21pc. The government is borrowing through treasury bills at 21.99pc.

For six-month certificates, the rate was increased by 118bps to 20.82pc while for one-year maturity the rate was revised upward by 98bps to 20.80pc. There has been a demand for increasing the profit rates since the inflation exceeded 36pc in April.

Further details show that the Saving Accounts rate was revised up by 100bps to 19.50pc.

The saving certificates average rate was increased by 27bps to 17.40pc while Bahbood, Shuhda and pension rates were kept unchanged at 16.56pc.

A tweet from National Savings on Monday said the new rates would be effective from Tuesday (May 9).

Sources in the banking sector said that it was the first relief for the people before the upcoming budget as the government is walking on a tightrope. The IMF has been keenly watching the development regarding the new budget which would be an election budget.

The PDM government which could not control inflation and boost economic activities is facing a tough time and is willing to provide some relief to the general public.

However, due to a shortage of revenue and record-high inflation along with poor foreign exchange reserves, the government is unable to ignore the IMF’s advice for the budget.

The IMF has once again asked the government to increase the interest rate for taming the unprecedented inflation.

The aggressive interest rate hikes since the start of the current fiscal year have failed to check inflation and slowed down economic activities due to the high cost of borrowing and price spirals pushed up production costs.

Published in Dawn, May 9th, 2023