The latest PIDE report says that savings in Pakistan have been reduced to 6.4%, which is the lowest ever in the past 30 years. Savings in Bangladesh are at 21%, India 28%, and Vietnam close to 30%. As the inflation erodes their earnings, investors keep money in gold and property.
ISLAMABAD: Pakistan has registered the lowest saving rate in thirty years, claims the latest report by the Pakistan Institute of Development Economics. The Pakistan savings rate three decade low of 2026 translates to Rs6 being put into savings out of every Rs100 earned in the country by its citizens. On average, the other Rs94 is either consumed or saved through informal channels. In publishing its findings together with its recommendations to the budget FY2026-27, PIDE was directly sending a message to its policymakers that the next budget must solve the problem of savings which has persisted over the last few decades but has reached an all-time low.
It’s hard to describe the 2026 Pakistan saving rate of 2026, being three decades low, as a worldwide problem when there is Bangladesh, who faces similar challenges to Pakistan, including being of equal economic standing, demographics, and economic issues, and yet manages to save 21 percent, almost three times the saving rate of Pakistan. India saves 28 percent, while Vietnam is approaching a saving rate of 30 percent. This isn’t due to their being wealthy nations where extra money is saved easily by households.
Why Are Pakistanis No Longer Saving?
There is a reason for Pakistan’s savings rate being at its lowest level in three decades. As highlighted by PIDE, it appears that the two key reasons that prevented savings were high levels of inflation as well as weak actual returns on savings. Whenever inflation rates surpass the rates paid on bank deposits – which is what has happened in Pakistan over the last three years – the natural thing to do would be to take money from bank deposits and put it into an alternative form of saving where the money retains its value.
This is further exacerbated by the government’s behavior in borrowing itself. Borrowing by the government in large quantities, at a high-interest rate, has crowded out borrowing by the private sector, raising the cost of loans for enterprises while ensuring that government securities remain the only option for savers wanting to earn an inflation-beating return. Such a system is bound to create what is described in the report by PIDE; the people refrain from saving in banks, investments become scarce in the domestic market, and the government resorts to borrowing abroad.
Why Are Pakistanis No Longer Saving?
There is a reason for Pakistan’s savings rate being at its lowest level in three decades. As highlighted by PIDE, it appears that the two key reasons that prevented savings were high levels of inflation as well as weak actual returns on savings. Whenever inflation rates surpass the rates paid on bank deposits – which is what has happened in Pakistan over the last three years – the natural thing to do would be to take money from bank deposits and put it into an alternative form of saving where the money retains its value.
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The Warning the Budget Can Give to Pakistan’s Structure
Low Pakistani savings in 2026 compared to the last 30 years is not an issue for individual households that can be solved by financial literacy programs. This is a consequence of a situation created by the economy itself — where there is a high level of inflation, real deposit rates being in the negative, private credit being crowded out, and no savings options for individuals. The warning by PIDE before June 10 is clear: the government needs to realize that it cannot keep growing based on borrowing forever. There comes a point when Pakistan will have to save and invest domestically.
