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Savings certificate sales ‘pushing up’ govt debt burden

  • Published at 10:25 pm October 15th, 2018
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Dhaka Tribune

According to the latest data of the Directorate of National Savings Certificates, the government has raised over one third of its fiscal year target from the sale of savings certificates in just two months

High yields on national savings instruments is encouraging a large number of small investors and pushing up the government's debt burden, analysts have said.

Officials at the Directorate of National Savings Certificates said a “striking difference” in the interest rates on offer has been encouraging people to move their money from banks to savings certificates.

While banks are typically offering 5-6% interest on deposits, savings schemes offer between 11.04% and 11.76%. 

AB Mirza Md Azizul Islam, the former finance advisor to the caretaker government, told the Dhaka Tribune that the enhanced amount of borrowing from the savings tools will “weigh on the budget project” and “enhance the debt burden of the government”.

“The government has become a hostage borrower from the savings tools as its attractive yields attract all walks of life,” he said.

According to the latest data of the Directorate of National Savings Certificates, the government has raised over one third of its fiscal year target from the sale of savings certificates in just two months.

The government wants to raise Tk26,197 core from the sale of certificates to meet the budget deficit for the current 2018-19 fiscal year.

Savings certificates worth a total of Tk9,057 crore were sold in July and August - around 35 percent of the government’s total target.

In July, the first month of the fiscal year, a total of Tk8,229 crore were sold. However, Tk3,193 crore was spent on paying the principal and profits in that month, meaning the government's net debt for the month was Tk5,035 crore.

According to the latest data, a total of Tk6,733 crore was sold in August. For this, Tk2,711 crore was spent on the cost of the previous purchase savings certificate and interest payments, creating a net debt for the month of Tk 4,022 crore.

In August last year, the net investment in savings certificate was Tk3,975 crore. 

In the whole of FY 2017-18, the government's net debt in savings certificates stood at Tk46,530 crore against a target of Tk44,000 crore.