- The government is revising rates upwards to absorb the benefits of an increase in its revenue from GDP.
- Analysts believe the recent spike in threshold yields may not go down well with the stock market.
- The new tariffs came into effect from Friday (March 25).
KARACHI: In order to absorb the benefit of an increase in its income from Pakistan Investment Bonds (PIBs), the government has increased the rate of profit on various national savings schemes, The news reported.
The new rates came into effect on March 25, 2022 (Friday).
The Central Directorate of National Savings (CDNS) – which falls under the Ministry of Finance – on Thursday announced an increase in the rate of profit on pensioner benefit accounts, Behbood savings certificates, regular income certificates, special savings accounts and defense certificates.
Meanwhile, analysts believe the recent spike in threshold yields may not go down well with the equity market, as an increase in yields from alternative instruments such as national savings schemes could make the capital market less attractive to investors.
According to a statement issued in this regard, the rate on regular income certificates was increased by 84 basis points (bps) to 11.04% per annum from 10.20%, while on savings certificates of the defense, it went from 10.32% to 10.92%, showing an increase of 60 basis points.
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The rate of return on special savings certificates has been increased by 100 basis points, from 10% to 11%. Rates for Behbood Savings Certificates, Retiree Benefit Account and Shuhada Family Welfare Account were raised to 12.72% pa from 12.24% earlier, up 48 basis points .
At the same time, profit rates on savings accounts remained unchanged at 8.25%.
Last week, the government raised 193 billion rupees by auctioning fixed-rate GDPs, with threshold yields on three-, five- and 10-year papers trending higher.
The three-year GDP yield rose 115 basis points to 11.85%, the five-year paper yield rose 100 basis points to 11.74% and the 10-year paper rate jumped 88 basis points. basis at 11.74%.
The State Bank of Pakistan (SBP) said it sold 54 billion rupees of three-year papers and 80 billion rupees of five-year papers and 59 billion rupees of 10-year papers. The government rejected offers for 15- and 20-year GDPs. In addition, no offers were received for the 30-year BIPs.
In Februarythe government has cut profit rates on various instruments of national savings schemes, mainly as a hedge against near runaway inflation.
This reduction in profit rates followed inflation based on the consumer price index (CPI) hitting 13% – the highest on record in two years. Rising inflation has eroded the purchasing power of fixed income groups such as wage earners and pensioners.
National savings schemes aim to promote savings and the development of abundant savings accounts.
All certificates in the scheme are suitable for all types of investment. They are suitable for investors interested in regular savings, fixed income securities, retirement planning, etc.