How much have Pakistan's savings rates declined from their peak?

If you invest in the certificates offered by Pakistan's National Savings, you have probably observed the decline in rates in recent months. This reduction is especially stark for the Short Term Savings Certificates, which have declined by 382 basis points (bps) to 17.9% from their peak of 21.72%.

The reduced rates are primarily because Savings Rates are linked to the cut-off yields of Pakistan Investment Bonds (PIBs). The yield on three-year PIBs has dropped by 314bps to 16.25% in August from its peak of 19.39% in May. Similarly, the 5-year PIB yield has decreased by 166bps to 15.30%, down from its peak of 16.95% in September 2023.

As Pakistan's inflation has started easing — from a record high of 38% last May to a three-year low of 9.6% this August — its central bank has cut the interest rate by 250bps since June, bringing it down to 19.5% from a record 22%.

As a result, rates of all savings certificates offered by National Savings have also declined.

The next meeting of the State Bank of Pakistan's Monetary Policy Committee will be held tomorrow (September 12), with analysts expecting a 150bps cut in the interest rate.