An Analysis of the Determinants of National Savings and Total Investment in Pakistan

Farhat Mahmood and Saud Ahmed Khan
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Farhat Mahmood: Pakistan Institute of Development Economics
Saud Ahmed Khan: Pakistan Institute of Development Economics

No 2026:5, PIDE-Working Papers from Pakistan Institute of Development Economics

Abstract: This study investigates the major determinants of national savings and total investment in Pakistan from 1981 to 2023 using the ordinary least squares (OLS) approach. The results of the savings function suggest that savings in Pakistan are significantly influenced by inflation, remittances, GDP, deposit rates, and the age dependency ratio. On the other hand, foreign direct investment (FDI) and gross domestic product (GDP) are found to be positive determinants of total investment. However, a comparison with selected Asian countries reveals that Pakistan lags behind all of them in both savings and investment rates. To follow the path of sustained economic growth taken by these countries, Pakistan needs to increase its total investment through higher national savings. Moreover, both savings and investment can be enhanced in the economy through operational policy measures that take into account the key determinants of both national savings and total investment.

Pages: 31
Date: 2026
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