KARACHI - The growth in the public and private savings, mobilised by the National Saving Schemes, has substantially increased by 73.11 per cent during October 2009, the highest level since Aug FY10. During October 2009, the volume of the national savings swelled by Rs18.718b. The government collected Rs25.601b during October FY10 from Rs6.8883b recorded in the last month (September) of current fiscal year while the total savings mobilised by NSS during Jul-Oct FY10, amounted to Rs 88.515b. The break-up of domestic savings mobilised by NSS under the Central Directorate of National Savings revealed that in the single month of October 2009, the domestic savings schemes collected Rs 1.136b on DDC (Defence Saving Certificate), Rs 5.441b on RSS (Regular Income Certificate), Rs 5.639b on SSC (Special Saving Certificate), Rs 3.042b on Prize Bonds and Rs 12.614b were built up in terms of different ranges of NSS. The SBP document said that after a sharp slide in FY08, savings rate (national savings to GDP ratio) improved only slightly in FY09, remaining well below the average of 17.7pc during the FY00- FY07 period. Specifically, the savings rate rose to 14.3pc in FY09 from 13.4 in the preceding year. This improvement entirely attributed to a relative fiscal consolidation as public savings increased to 1.2pc of GDP in FY09 as against dis-savings of 1.8pc during FY08. It is important to mention here that public savings under the sub-head, other which includes savings by the public sector enterprises, remained unchanged at 0.4pc of GDP during FY09. In contrast to savings by the public sector, private savings deteriorated for the second consecutive year, declined to 13.2pc of GDP, the lowest level since FY99. SBP pointed out that the decline in private savings probably stemmed from a number of factors including: (a) sharp drop in asset prices (both real estate and equity); (b) generally negative real interest rates on saving instruments; and, (c) a sharp increase of 5.2pc in real private consumption expenditure during FY09. The decline in private savings to GDP ratio was primarily due to fall in household savings rate, as corporate savings remained unchanged. It is also disappointing that domestic savings aspc of GDP in FY09 declined for the third consecutive year, indicating that the source of improvement in national savings is net factors income from abroad (largely workers remittances). It should be kept in mind that low saving not only inhibits availability of loanable funds but also restricts growth on a sustainable basis. The average national saving at 15.1pc of GDP for the period FY60-FY09 has remained significantly lower relative to developing Asian economies. SBP document found that low income, low level of financial inclusion, saving in kind, high propensity to consume, avoidance of interest-based financial system due to religious beliefs and a culture of conspicuous consumption are some factors that have been pointed out as responsible for low savings in Pakistan. Due to low national savings rate, country has to borrow to finance even relatively low investment needs of the country. Importantly, borrowing funds to finance domestic investment resulted in debt accumulation, which has consequences for fiscal and external balances in medium to long-run. In this background, there is an urgent need of steps to prop up household savings and channel the unutilised funds with the households to more worthwhile and productive use; as in channelling it to the financial institutions. The urgency to develop a savings culture and institutions has become even greater in light of the recent int'l financial crisis. SBP concerned that capital flows to developing countries had already begun dropping by FY07, and likely to remain constraint for some years. Countries such as Pakistan, which still has significant macroeconomic imbalances, will face problems in accessing international capital market at reasonable cost. Thus, it is imperative to mobilise domestic savings in order to finance a greater part of domestic investment. To mobilise savings, it is necessary to build savings institutions that can tap pension and provident funds. In addition, establishment of efficient secondary debt market is also needed to offer competitive returns on savings and increase in the number of participants in govt debt.