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March 4, 2021

NSS rates raised by up to 43bps

Business

March 4, 2021

KARACHI: Profit rates on different National Savings Scheme (NSS) certificates were raised by up to 43 basis points from Wednesday by the Central Directorate of National Savings.

Profit rates on defence savings certificates increased to 9.51 percent from 9.42 percent. Rates of return on special savings certificates were raised from 7.97 percent to 8.4 percent, according to the finance division.

Profit rates on regular income certificates remain unchanged at nine percent. Likewise, rates of return on Behbood, pensioners and shuhada welfare certificates were kept unchanged at 11.28 percent.

Profit rates on three-month savings certificates were raised to 6.8 percent from 6.76 percent, while those on six-month savings certificates increased to seven percent from 6.82 percent and profit rates on one year savings certificates were raised to 7.35 percent from 6.92 percent.

NSS certificate rates have started to ratchet up since July last after the central bank decided to reverse its interest rate reduction policy considering upside risks to current growth projection.

The monetary stance is in line with the market expectations after the SBP delivered a cumulative reduction of 625 basis points five times during the last year to buoy sinking growth amid coronavirus lockdown. The economy contracted 0.4 percent during the last fiscal year of 2019/20.

The SBP said the economic recovery underway since July last has strengthened in recent months.

“Since the last meeting in November the domestic recovery has gained some further traction… there are upside risks to the current growth projection of slightly above 2 percent in FY21,” the SBP said in a latest monetary policy statement. “On the inflation front, recent out-turns are also encouraging, suggesting a waning of supply-side price pressures from food and still-benign core inflation.”

Prices of non-perishable foods that have around 30 percent weight in the consumer price index basket showed upward trend year-on-year and month-on-month. Their prices rose 2.4 percent in February over January and 4.3 percent over February 2020, according to the Pakistan Bureau of Statistics. Annual consumer inflation rose to 8.7 percent in February compared to 5.7 percent in January. Consumer inflation increased 1.8 percent month-on-month in February compared to a decrease of 0.2 percent in the previous month and a decrease of 1 percent in February last. Annual inflation rate was 12.4 percent in February 2020.

The central bank has kept the interest on hold at seven percent three times consecutively with inflation expectations well anchored.

Nonetheless, its uptrend can lead to reversal in soft monetary policy stance after March, according to analysts.