The Nexus Between Private Savings and Macroeconomic Stability in Pakistan: A Longitudinal Analysis (1973-2024) with Comparative Insights and Policy Recommendations

Volume 11, Issue 4, August 2026     |     PP. 132-166      |     PDF (936 K)    |     Pub. Date: November 3, 2026
DOI: 10.54647/economics790548    19 Downloads     175 Views  

Author(s)

Muhammad Quaid, Department of Operations & Supply Chain, NUST Business School, National University of Science Technology (NUST), H-12, Islamabad, Pakistan

Abstract
Purpose – This longitudinal study examines the relationship between private savings and macroeconomic stability in Pakistan, with particular emphasis on the balance-of-payments (BoP) nexus. It tests the conventional assumption that private savings significantly influence BoP dynamics and situates Pakistan’s experience within a comparative regional and global context.
Design/methodology/approach – Using an Ordinary Least Squares (OLS) framework with robustness checks, the study analyses five decades (1973-2024) of macroeconomic data drawn from the State Bank of Pakistan, the IMF, and the World Bank. The analysis incorporates the 2020-2023 crisis period, projects outcomes under alternative policy interventions, and benchmarks Pakistan against South Asian peers and other developing economies.
Findings – Private savings show no statistically significant relationship with BoP deficits, challenging the conventional theoretical linkage. Private and national savings move closely together (coefficient = 0.8575, p = 0.000); exchange rate depreciation raises private savings; rising per capita income paradoxically lowers the savings rate; Pakistan’s savings performance (11.8% of GDP) lags well behind India (23.4%) and Bangladesh (18.6%); and the post-2010 structural decline reflects inflationary pressure, shifting consumption patterns, and socio-political instability.
Practical implications – Policymakers should decouple BoP strategy from savings targets and instead priorities export diversification, remittance channels, and exchange rate stability. A combined package of tax incentives (10% rebates), financial inclusion, exchange rate management, and pension reform could raise private savings by 3.12 percentage points of GDP, to 10.62% by 2030.
Originality/value – This is the first five-decade assessment of Pakistan’s Savings-BoP nexus with systematic cross-country benchmarking. It challenges the assumption of savings-led BoP adjustment and offers evidence-based, transferable lessons for developing economies facing similar macroeconomic constraints.

Keywords
Private savings, balance of payments, remittances, comparative development, macroeconomic stability, savings mobilization

Cite this paper
Muhammad Quaid, The Nexus Between Private Savings and Macroeconomic Stability in Pakistan: A Longitudinal Analysis (1973-2024) with Comparative Insights and Policy Recommendations , SCIREA Journal of Economics. Volume 11, Issue 4, August 2026 | PP. 132-166. 10.54647/economics790548

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