Islamabad:Dr SM Naeem Nawaz and Wajid Islam from Pakistan Institute of Development Economics (PIDE) have warned that Pakistan's gross domestic savings collapsed from 17.4 percent of GDP in 1992 to just 6.4 percent in 2024, the weakest in a generation and far below every regional peers.
In a policy viewpoint titled “Mobilising domestic savings: a finance bill and institutional reform agenda for Pakistan” they urge the Finance Bill FY2026–27 to launch a targeted National Savings Mobilisation Package before the country's shrinking savings base triggers yet another external financing crisis. The report delivers a pointed diagnosis: behind almost every balance-of-payments emergency and IMF programme of the past three decades lies the same structural failure, a nation that progressively stopped saving and is now compelled to finance its future with borrowed foreign money.
With Pakistan’s thirty-year savings average standing at just 10.9 percent of GDP, the gap with regional peers is stark. Over the same period, Bangladesh saved nearly 21 percent of GDP, India over 28 percent and Vietnam close to 30 percent. As the authors observe, these countries were not wealthier at the outset, several began poorer than Pakistan. They made saving safe, rational and rewarding. Pakistan, the report argues, did the opposite.
The authors trace the collapse to a self-reinforcing inflation-consumption trap. With 93.6 percent of national income now absorbed by consumption and inflation repeatedly outrunning bank deposit returns, formal saving has become a guaranteed slow loss. Households respond by hoarding cash, buying gold and investing in property, assets that finance no factory and create no employment. Compounding the damage, the government has itself become a net dissaver, borrowing so heavily from domestic banks that little credit remains available for productive private investment.
Voluntary pension incentives under Section 63 should be strengthened with targeted additional support for first-time contributors, women and self-employed and informal-sector workers. A reintroduced protection-linked savings credit under Section 62A should cover health insurance, life insurance and family takaful to build precautionary savings and reduce distress financing.
