Finance Minister, Ishaq Dar launched first-ever registered premium prize bonds on 10thMarch, 2017 at a ceremony held at SBP Islamabad office. Speaking on the occasion, he said that first prize of the bond will be Rs 80 million and profit rate at the rate of 3 percent per annum will also be paid to the holders of the bonds. The value of the bonds will be Rs 40,000 each, a printed receipt will be given to the buyers of the bonds and there will be no limit on investment and period of the bond. Prize money will be directly transferred in the account of the winner instead of publishing his name in the newspapers. Bonds will be available for individuals as well as public and private companies. However, banks will not be allowed to invest in the bonds. The second prize of Rs 30 million will be given to 3 bond holders while third prize of Rs 0.5 million will be offered to 660 bond holders. The Finance Minister, as usual, could not resist the temptation to highlight the achievements of the PML-N government. He stated that economic experts see Pakistan among the top 20 economies by 2030 and the credit rating of the economy has significantly improved. The government had already taken several reform measures and Pakistan Stock Exchange (PSX) had been included in five big stock exchanges of the world. Pakistan had also become a member of OECD and signed a bilateral treaty with Switzerland on sharing of information in order to detect tax evaders.
Sale of prize bonds soars as the interest rate in the economy comes down. This is due to a host of reasons such as: foregoing nominal return on a regular basis and taking a chance on prizes. With more than 50 percent of buyers of prize bonds being women, it may attract women to save more provided the expenditure on food for the family comes down. With interest rate at an all-time low, this is a timely product to attract savings to the NSS bouquet.
The launch of the registered premium bonds is of course another effort by the government to tap another source of financing the budgetary deficit and raise the saving rate of the economy. Previously, only two types of investment in government securities were on offer; one, carrying a fixed interest rate while the other promising prize money with zero interest income. Those who preferred regular income invested in saving instruments like PIBs, T-bills, Behbood saving certificates, regular income certificates, etc, while those who preferred to take a gamble with nil interest rate invested in prize bonds. The attractive feature of the new instrument is that it could cater to both the speculative instinct of winning a prize with safe investment and the desire of getting a regular income. This positive feature has been enhanced by the requirement that it could only be issued in the name of investor with direct crediting facility of prize money and profit into investors' bank account. Another positive feature is that registered premium bonds will be encashable anytime from the issuing office of the SBP. This means that investors would not suffer any losses even if the new bonds were stolen, burnt or misplaced. All these features would make the new bonds attractive for the investors but the amount likely to be generated from this source is difficult to predict because of several reasons. Firstly, most of the savings of households and corporates must have already been invested in one of the schemes presently operating, including bank deposits and would only be shifted to the new scheme if it is relatively more remunerative. Secondly, if money is transferred to the new bonds from the existing national saving schemes, it will not make any difference to the saving rate of the economy or the modes of financing the budget deficit. And thirdly, people would not rush to buy the new investment bonds because tax-evaded money cannot possibly be invested due to the requirement of issuance of the bonds in the name of investors. As such, investors are likely to think many times before they invest in the registered premium bonds and the response could be lukewarm. So far as the achievements of the government are concerned, the less said the better. We can only say that it will be better for the government to prepare itself to face the new challenges on the economic front rather than basking in the glory of certain positive indicators and continue to make tall claims about this.