Pakistan’s savings rate falls to 30-year low of 6.4%, PIDE says

Pakistan’s national savings rate has dropped to 6.4%, its lowest level in three decades, as citizens save only Rs6 from every Rs100 they earn, according to a Pakistan Institute of Development Economics report.

The report said the decline in domestic savings was restricting investment and increasing Pakistan’s dependence on foreign loans, external financial assistance and repeated International Monetary Fund programmes.

PIDE presented the findings in its recommendations for the federal budget for fiscal year 2026-27, urging the government to introduce measures aimed at reversing the fall in household savings and expanding the country’s domestic resource base.

Pakistan’s savings rate remains below that of comparable regional economies. Bangladesh’s savings rate stands at 21%, India’s at 28%, and Vietnam’s at nearly 30%, according to the report.

PIDE said high inflation and low returns offered on savings had discouraged people from placing their money in banks and formal savings schemes.

As a result, households were increasingly keeping their wealth in gold, property and cash, reducing the amount of capital available for productive investment and economic activity.

The institute also identified government borrowing as a constraint on investment, saying heavy public-sector borrowing was reducing the funds available to private businesses.

It warned that financing future economic growth mainly through borrowed resources was not sustainable and would leave Pakistan exposed to continuing external financing pressures.

PIDE proposed launching a national savings campaign and restoring tax incentives for long-term savings instruments in the upcoming federal budget.

It also recommended special savings incentives for women, pensioners and people working in the informal sector, alongside additional safeguards for small savers.

The report called for expanding digital access to national savings products so that more people could participate in formal savings schemes without relying on physical branches.

PIDE also proposed establishing an annual savings mobilisation dashboard to measure progress, track participation and assess whether government policies were increasing long-term savings.

The institute urged the government to combine these measures with structural reforms aimed at strengthening domestic investment and reducing Pakistan’s reliance on foreign borrowing.