Savings play vital role to help maintain a higher level of investment, which is a key determinant of economic growth. Higher investment rates, mainly financed by domestic savings are necessary to guarantee the sustained rates of economic growth required for the alleviation of widespread poverty in the country while low rates of savings are associated with increased vulnerability to macro-economic instability. Therefore, government should encourage the development of a savings culture in the country by offering attractive rates on domestic savings. This was said by Mian Shaukat, President, Islamabad Chamber of Commerce and Industry in a statement. He said Pakistan is a savings deficient country because government is paying meager rate of return on savings despite the fact that government can generate lot of financial resources by promoting savings. He said to make this happen; government should immediately enhance the rate of return on bank savings as well as on national savings schemes so that country could easily promote investment and infrastructure development projects in the country. He also emphasized for narrowing down the banking spread which is very high as compared to other countries.
ICCI President said the inability of government to mobilize adequate domestic resources to finance development has continued to restrain the rate of growth in Pakistan due to which the actual rate of development has been below the potential rate of development. He said this situation played a part in increasing our dependence on external financial resources in the form of loans, investments and grants to an extent that it now impinges on our economic sovereignty. He said Pakistan has the potential to break the vicious circle of poverty by promoting the culture of domestic savings, which will reverse the cycle from low to increased income to increased investment to increased productivity. He said Pakistan’s national savings to GDP ratio in FY08 was 13.3 per cent as compared with 17.8 per cent in FY07 which shows a declining trend in savings.
Mian Shaukat Masud said that a large savings-investment gap is not desirable for the country in the long run because of its negative impact on macro-economic stability. He said this phenomenon results in accumulation of national debt and puts additional burden on the country’s balance of payments in terms of mounting debt servicing. He said savings to GDP ratio is sufficiently low in Pakistan as compared with other regional economies. He said according to Asian Development Bank (Key Indicators 2007) gross domestic savings as a percentage of GDP in 2006 were 32.4 in India, 20.3 in Bangladesh, 50.5 in Singapore, 43 in Malaysia, 47.3 in China and while just 13.7 in Pakistan. He said Pakistan needs to undertake developmental projects like building of small and big dams, roads, bridges, hydel power stations and other infrastructure development projects and government will be in need of sufficient financing to start these gigantic tasks. He said the best way to do this is to promote maximum savings so that government could easily initiate and complete such developmental projects to put the country on the path to progress and prosperity. Therefore, government should bring attraction in savings to get economic results from enhanced savings.