Islamabad: The Pakistan Institute of Development Economics (PIDE) has recommended launching a nationwide “National Savings Drive” under the upcoming Finance Bill 2026–27 to boost domestic savings and improve Pakistan’s long-term economic stability.
According to Beyond Time News, the proposal aims to reduce reliance on external borrowing and strengthen local financial resources through targeted reforms and incentives.
The policy suggestion comes at a time when Pakistan continues to face pressure on its fiscal system, rising inflation, and limited domestic investment capacity.
Domestic Savings Identified as Key Economic Challenge
PIDE’s policy paper highlights a sharp decline in Pakistan’s savings rate over the past three decades.
The report notes that gross domestic savings stood at only 6.4 percent of GDP in 2024. In comparison, the rate was 17.4 percent in 1992. This long-term decline signals growing pressure on the country’s financial system.
Moreover, researchers argue that low savings reduce the government’s ability to fund development projects internally. As a result, Pakistan depends heavily on external loans and financial assistance.
Study Links Low Savings to Inflation and Consumption Patterns
The study identifies several structural challenges affecting savings behavior.
Inflation has reduced household purchasing power. Meanwhile, rising consumption patterns have encouraged short-term spending rather than long-term saving.
In addition, many households prefer informal investment options such as gold and real estate instead of banking instruments. Consequently, formal savings channels remain underutilized.
Proposal Calls for National Savings Mobilization Package
PIDE recommends a comprehensive savings reform package through the Finance Bill 2026–27.
The proposal focuses on making savings more attractive, secure, and accessible for all income groups. Furthermore, it aims to improve trust in formal financial systems.
Key recommendations include tax incentives, pension reforms, and expanded financial products for small savers.
Tax Incentives and Pension Reforms Suggested
The report suggests restoring and redesigning tax incentives linked to savings instruments.
It also recommends introducing a capped tax credit under a revised Section 62 of the Income Tax Ordinance. This would encourage long-term savings through approved financial products.
Moreover, the study proposes strengthening voluntary pension schemes under Section 63. It especially highlights support for first-time contributors, women, self-employed individuals, and informal workers.
Insurance and Protection-Based Savings Expansion
PIDE also recommends reintroducing a protection-linked savings credit under Section 62A.
This mechanism would cover health insurance, life insurance, and family takaful products. As a result, households would gain both financial protection and savings benefits.
In addition, the study suggests targeted incentives for vulnerable groups, including pensioners, widows, families of martyrs (Shuhada), women, and senior citizens.
Expanding Access to Modern Financial Products
The report emphasizes expanding access to a wider range of savings instruments.
These include Sukuk, Shariah-compliant savings products, voluntary pension schemes, takaful, micro-insurance, REITs, regulated gold funds, and digitized National Savings products.
Furthermore, it recommends simplified Know Your Customer (KYC) procedures for small accounts. This step would help increase financial inclusion and encourage more people to enter the formal banking system.
Read more:PIDE Breaks Into Top Research Tier, Secures 15th Position in HEC ORIC Rankings
Experts Stress Importance of Stable Economic Environment
Dr. S. M. Naeem Nawaz stated that strengthening domestic savings is essential for long-term economic growth and reduced dependence on external financing.
Similarly, Research Economist Wajid Islam emphasized the need to make savings instruments safe, attractive, and tax-efficient. He argued that stronger incentives would increase participation in the financial system.
Monitoring System Proposed for Savings Growth
The study also recommends establishing an annual “Savings Mobilization Dashboard.”
This system would track key indicators such as domestic savings rates, pension participation, retail Sukuk investment, women-owned bank accounts, and private-sector credit distribution.
Moreover, policymakers could use this data to evaluate reforms and adjust strategies for better economic outcomes.
Conclusion
PIDE’s proposal highlights a strategic shift toward strengthening Pakistan’s internal financial capacity.
If implemented, the National Savings Drive could help improve investment levels, reduce external dependency, and support more stable economic growth over time.
FAQs
What is the National Savings Drive proposed by PIDE?
It is a policy initiative aimed at increasing domestic savings through tax incentives, financial reforms, and new savings products.
Why does Pakistan need higher savings?
Higher savings help reduce dependence on external loans and support long-term economic growth and investment.
What is the current savings rate in Pakistan?
According to PIDE, Pakistan’s gross domestic savings stood at 6.4% of GDP in 2024.
Which groups will benefit from the proposed reforms?
The proposal highlights support for women, pensioners, widows, senior citizens, and informal workers.
What financial products are included in the plan?
The plan includes Sukuk, pension schemes, takaful, REITs, micro-insurance, gold funds, and digital savings products.
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