PIDE suggests launching of ‘National Savings Drive’ to strengthen economic resilience

ISLAMABAD, Jun 07 (APP): The Pakistan Institute of Development Economics (PIDE) on Sunday suggested launching a targeted ‘National Savings Drive’ through the upcoming Finance Bill 2026-27 aimed at strengthening domestic resource mobilization and enhancing the country’s economic resilience.

Authored by PIDE, Professor of Economics Dr S. M. Naeem Nawaz and Research Economist Wajid Islam, the policy viewpoint titled “Mobilizing Domestic Savings: A Finance Bill and Institutional Reform Agenda for Pakistan” highlighted the importance of increasing domestic savings to support sustainable economic growth and reduce reliance on external financing.

The study revealed that Pakistan’s gross domestic savings stood at 6.4 percent of GDP in 2024, compared with 17.4 per cent in 1992, stressing the need for measures to encourage household and institutional savings.

According to the report, stronger domestic savings can provide a stable foundation for investment, economic expansion and financial stability. It was observed that several regional economies have achieved higher savings rates through policies that promote secure, accessible and rewarding savings mechanisms.

The policy viewpoint identified inflationary pressures, high consumption patterns and limited incentives for formal savings as factors affecting savings mobilization.

It mentioned that households often prefer alternative assets such as gold and real estate, underscoring the need to strengthen confidence in formal financial instruments.

The study proposed a comprehensive National Savings Mobilization Package under the Finance Bill 2026-27.

Key recommendations include restoring and redesigning savings-related tax incentives, introducing a capped tax credit for approved long-term savings instruments under a revised Section 62 of the Income Tax Ordinance, and strengthening voluntary pension incentives under Section 63, particularly for first-time contributors, women, self-employed individuals and workers in the informal sector.

It also proposed reintroducing a protection-linked savings credit under Section 62A covering health insurance, life insurance and family takaful to encourage precautionary savings and support household financial security.

The report highlighted the importance of supporting vulnerable savers through targeted concessions for pensioners, widows, Shuhada families, women and senior citizens, ensuring that benefits are directed towards genuine small savers.

The authors further recommended expanding access to Sukuk, Shariah-compliant savings products, voluntary pension schemes, takaful, micro-insurance, REITs, regulated gold funds and digitized National Savings products. Simplified Know Your Customer (KYC) requirements for small-balance accounts were also proposed to encourage greater financial inclusion.

Dr S. M. Naeem Nawaz said strengthening the domestic savings base was essential for supporting long-term economic development and reducing dependence on external financing sources.

Wajid Islam said the focus should be on creating incentives that make formal savings safe, attractive and tax-efficient, thereby encouraging greater participation in the financial system.

The study noted that sustained progress would also require price stability, competitive returns on savings, stronger consumer protection and prudent fiscal management. It recommended establishing an annual Savings Mobilization Dashboard to track key indicators, including domestic savings rates, voluntary pension participation, retail Sukuk investment, women-owned accounts and private-sector credit allocation.