KARACHI (December 23 2002) : Investments in National Saving Schemes (NSS) ballooned by 67.45 percent in the four months up to October 31, 2002, on expectations that the government would cut the rates on these schemes following the cut in Pakistan Investment Bonds (PIBs) rates.
Ever since the launch of the market-based government debt instruments, ie PIBs, in December 2000, the returns available on investment in National Savings Schemes have been linked to these PIBs.
The SBP annual report for FY 01 also states that 'the resulting yield curve (for PIBs) was to be used as a benchmark to determine the profit structure on NSS instruments, especially the 10-year DSC.'
The investment in NSS registered an increase of 67.45 percent to Rs 17.181 billion in four months up to October 31, 2002, compared with Rs 10.260 billion in the same period a year ago.
In the last financial year, NSS recorded tremendous growth and was tripled to Rs 75 billion. The main factor during the last year, and trickled to current fiscal year, was the continuous flow of remittances from overseas Pakistanis.
According to an analyst, appreciation of Pakistan rupee forced the investors to put their money in rupee instead of past mindset of putting the earnings or savings into dollars.
They found NSS a safe haven as the returns on them is fixed. Investors accelerated their savings in NSS during the first four months of this fiscal year as the cut in these government securities are expected by next month.
The NSS rates for the Jan-Jun 2003 period are to be revised in January 2003.
According to a rough calculation, the return on DSCs could come between 10 and 11 percent from the current 11.6 percent. Lowering in NSS rates would thus reduce government's financing costs.