Experts say cut in NSS rates, oversubscription of Sukuk to provide financial space

A cut of 5.42 percent in the profit rates of National Savings Scheme (NSS) and a 70 percent oversubscription in the energy Sukuk would provide a financial space to the government for continuity of social protection in the current challenging times, said financial market experts.
It may be noted that the federal government has launched a cash transfer programme of Rs 1,200 billion for 20.2 million people under Ehsas Kafalat Programme since the end of March. Talking to Business Recorder, financial market expert Asif Baig Mirza said the total deposits of NSS are Rs 4 trillion, which is 28 percent of the total deposits of commercial banks and constitutes 19 percent of the total domestic debt.
He said the current drop of 5.42 percent in the profit rates of NSS during the last two months explains the quantum of relief for the government and the resultant fiscal space available in the current challenging times. He expressed the hope that the government would continue with its social assistance programme during the next fiscal year to mitigate the impact of coronavirus pandemic.
Similarly, he added, the oversubscribed Rs 200 billion Sukuk would provide a financial cushion at a time when the government is set to finalize the budget for the fiscal year 2020-21. The government has got this money at a price of six months KIBOR (currently 7.8pc) minus 0.10 percent. It was a transparent, non-controversial process with a secondary market and the profit will be paid on 6 monthly basis in the instant case. Therefore, the future trend, apparently, looks towards South, he said.
Further, he said, it would give a boost to the credit rating methodology which is an accepted business norm. Mirza said the government should keep focusing on the viability of a vibrant bond market. He said the bond market is much bigger than the total bank deposits in the US.
However, there are a few others who have raised the moot point that how the government would spend it and ultimately use the available fiscal space. A social protection programme, expert Anjum Nasim said a strong economic growth from 2004 to 2006 had created the fiscal space for the government to adopt the National Social Protection Strategy in 2007. It was not until 2008, and particularly after the new elected federal and provincial governments were in place, that fiscal allocations for social assistance increased dramatically. The scale of the programmes was far more ambitious than that envisaged in NSPS. By the time BISP program and the Punjab government's food support program were launched, the case for social protection had shifted from the way it was advocated in NSPS economic growth.