Domestic Resource Mobilisation for Development: An Analysis of the Past Trends and Future Options

This paper examines the determinants of private, domestic, and household savings in Pakistan. The analysis shows that private savings can be expected to grow gradually as a result of rising per-capita income, falling dependency burden, improved financial deepening and macro stability. Bivariate causality tests between GNP. and savings show that GNP causes both domestic and public savings. However. the causality test is inconclusive in the case of causation between GNP and private savings. This finding has important policy implication in the sense that once a virtual cycle succeeds in accelerating growth, saving would catch up with a "lag. In this sense, financing of investment is not a major constraint. It would get relaxed wilh time as has been the case of many East Asian countries. The paper also addresses the role of long term savings instruments in increasing savings and in improving t/leirefficient allocation.