During the initial two months of FY24, net investment increased, surpassing the figures from the corresponding period in FY23 by a staggering 14 times. However, the third month witnessed a sharp decline in investments specifically in savings certificates.
A close examination of the most recent National Saving Certificate (NSC) data reveals a significant downturn, with net investment in the sector reaching a negative Tk148 crore in September of FY24. In contrast, the same month in FY23 saw a negative net investment of Tk70.63 crore.
Despite the robust net investment of Tk5,160.93 crore in the preceding two months, the sudden plunge in savings certificates' investments during the third month raises questions about the sector's stability.
In September FY24 savings certificates worth Tk6,785.79 crore parched when Tk6,893.64 crore were redeemed.
The net investment is to be found after deducting the principal from the total deposit.
That means, the net investment of certificates in September was a negative Tk147.85 crore.
July-September
Data shows, in July, August and September the total amount deposited against savings certificates was Tk21,656.05 crore and Tk22,921.02 crore was the principal payment.
The net sale of savings certificates is what remains after paying the interest and principal on the savings certificate sold previously.
So, the principal payment was more than the total deposit or net investment was a negative Tk1,264.97 crore.
In other words, within the initial three months of FY24, an excess of Tk1,264.97 crore has been redeemed compared to the total value of savings certificates sold in that period.
July-August
However, In the first two months of FY24 July and August, more savings certificates were purchased than redeemed. The net sales of national savings certificates surged to Tk5,562.13 crore in July and August, a significant increase from Tk401.2 crore during the same period in FY23.
In other words, the net investment of certificates has increased almost 14 times or Tk5,160.93 crore in these two months.
Experts
Ahsan H Mansur, executive director of Policy Research Institute (PRI) said: “If you observe closely, in the first two months of the ongoing fiscal year, it has not increased so much. However, it has increased quite a bit compared to the same period of the previous fiscal year and I have no idea why it nosedives at such an abnormal rate in the third month. I don't know if there is any particular reason.”
However, looking at the three-month average, it is clear that savings certificate investment has fallen a lot. Apparently, the government's expenditure is going down a bit. This is definitely a good thing, but under the pressure of high inflation, those who depend on the income of savings certificates must be facing problems, he explains.
Concept of savings certificates
A decrease in investments in savings certificates is often viewed favorably by the government since, from an economic perspective, the net sale of these certificates is essentially a form of internal borrowing for the government. The funds generated from the sale are deposited into the government treasury and directed towards the state's development initiatives. In return, investors in savings certificates are obligated to pay monthly earnings.
As a result, the Ministry of Finance establishes an annual target for government borrowing from this domestic source in the budget.
In the FY24 budget, the government has substantially reduced the borrowing target from these savings tools by 48.57% compared to the previous year, now set at Tk18,000 crore.
