First half of FY23 saw more withdrawals than investments

The demand on money withdrawal has increased significantly  in the first half (H1) of the current fiscal year as compared to new savings certificates investments.

Data analysis revealed that between July and December of FY23, investors with savings certificates withdrew Tk3,106 crore more than they had put in.

However, investments in savings certificates surged by roughly Tk9,589 crore during the same time in FY22.

According to the most recent Bangladesh Bank data, people invested Tk40,471 crore in National Savings Certificates from July to December of FY23. During the same time period, however, investors withdrew Tk43,578 crore.

That means net sales are declining, or people withdrew Tk3,106 crore more than they invested.

In the same period of the previous fiscal year, investments in the savings certificates net sales increased by Tk9,589 crore.

People invested Tk51,632 crore and withdrew Tk42,042 crore in the first half of FY22.

Rising inflation, according to economists has escalated people's spending while decreasing the overall trend in savings, including savings certificates and bank accounts. As a result, people are spending their money in order to survive in these difficult economic circumstances.

Ahsan H Mansur, executive director of the Policy Research Institute (PRI) of Bangladesh told Dhaka Tribune that due to inflation and the rising cost of living expenses, people have less money in hand. So they are no longer able to save as before.

Accepting the ongoing economical tuff time Mohammad Shah Alam, director of the National Savings Directorate, said that the prices of all kinds of goods have increased in recent times so people are spending more money than saving in savings certificates, it's quite obvious. Besides, there is some effect of policy change. Such as women who also invest here with the money given by their children or family members but now, they need a TIN certificate to invest more than Tk5 lakh.”

Declining investment in savings certificates is often considered good for the government, because in economic terms, the net sale of savings certificates is considered a loan or government's internal borrowing.

The net sale of savings certificates is what remains after paying the interest and principal on the savings certificate sold previously.

The proceeds of the sale are put in the government treasury and utilized to fund state development.

In exchange, investors in savings certificates must pay earnings every month.

As a result, the Ministry of Finance sets a target for government borrowing from this domestic borrowing source in the budget each year.

However, according to the FY23 budget, the government's target for domestic borrowing for FY23 is Tk1,46,335 crore.

The government banking system borrowing target is Tk1,06,334 crore and the borrowing target from other domestic non-banking sources has been set at Tk40,001 crore.

Among these Tk35,000 crore is targeted from saving certificates alone.

However, according to Bangladesh Bank Q1 (July-September) of FY23 data, government saving certificates borrowing fell significantly with hefty repayments.

Regarding the government borrowing target, which failed to meet its target, former IMF economist Ahsan H Mansur earlier said that due to a declining trend in saving certificate sales, the government is borrowing money from banks with less debt from savings certificates. 

However, in this case, the government has to take more loans from Bangladesh Bank as commercial banks do not have such capital, he added.