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ISLAMABAD, Dec 11 (APP):Experts at a seminar organized by the Pakistan Institute of Development Economics (PIDE) on Thursday underlined that Pakistan’s persistent savings gap could only be addressed through coherent, long-horizon economic and social reforms aimed at rebalancing incentives, deepening financial markets, and restoring public trust in formal savings channels.
The seminar, titled “The Challenges of Low Savings in Pakistan,” was chaired by PIDE Vice Chancellor Dr. Nadeem Javaid and featured Additional Director/Division Head at the State Bank of Pakistan (SBP) Sohaib Jamali, as the keynote speaker.
Director of PIDE’s Macro Policy Lab, Dr. Haider Ali, served as discussant, while Research Economist Amna Riaz moderated the session.
Speakers stressed that Pakistan needed to rationalize taxes on deposits and financial transactions, curb distortions that divert capital into speculative real estate, strengthen capital markets, broaden retail participation through asset-management platforms, and expand pension and takaful systems.
They also underscored the importance of reviving last-mile savings access through digitized postal and branchless channels, coupled with stronger consumer protection and transparent regulation. Higher savings, they noted, must move in tandem with higher incentives for productive investment to support sustainable growth.
Opening the discussion, Jamali presented new State Bank analysis showing that Pakistan’s domestic savings rate has remained stuck between 12 and 15 percent for nearly two decades, well below the 20 percent threshold associated with investment takeoff in comparable economies.
He said the shortfall was structural, shaped by low and volatile growth, high inflation, a heavy youth dependency ratio, widespread informality, and underdeveloped financial markets.
He said that while households do save, persistent public-sector dissaving and weak intermediation diminish the impact of those savings.
Over the past decade, a large proportion of household financial savings, through National Savings Schemes, mutual funds, insurance pools, and bank deposits, had ultimately flowed into government securities, limiting productivity gains.
He noted that real returns on most formal instruments had been low or negative after inflation, pushing savers toward gold and real estate, the only assets that consistently preserved value.
Financial literacy gaps, taxes on banking transactions, thin capital-market participation, and modest insurance and pension penetration further constrained savings growth, while the discontinuation of postal savings in 2021 removed a key last-mile savings tool for low-income households.
Discussant Dr Haider Ali commended the diagnostic’s depth, noting that the savings challenge spanned economic, demographic, institutional, and behavioral dimensions.
He warned that higher savings alone would not deliver stronger growth without reversing Pakistan’s declining productivity. “A low domestic savings rate is a symptom of deeper structural issues,” he said, adding that rising poverty and a shrinking middle class were directly eroding the national savings pool.
In his concluding remarks, Dr Nadeem Javaid highlighted the social and cultural norms shaping saving behavior.
He said Pakistan’s persistent housing shortage and high real estate returns continued to attract both formal and informal savings, while strong family networks and philanthropic traditions reduced incentives for precautionary savings.
Drawing on international practices, he stressed that mandatory, long-term pension savings, supported by employers and managed professionally, could mobilize stable capital for development, provided governance remained transparent and funds were deployed productively.
Looking ahead, Dr Nadeem said that the URAAN Pakistan framework’s trillion-dollar aspirations could not be achieved without foundational reforms. “We must lift our domestic savings rate to at least 20 percent of GDP while simultaneously driving productivity growth and strengthening our financial architecture,” he remarked.