Two months into FY24, the net sales of national savings certificates witnessed sharp drops in September and October.
According to National Savings Directorate data, the month of October alone witnessed net sales of Tk1,040 crore negative compared with those of Tk963 crore negative in the same month of FY23.
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.
The net investment is to be found after deducting the principal from the total deposit. A negative value occurs when the repayment of the principal amount exceeds the sales.
Ahsan H Mansur, executive director of Policy Research Institute (PRI), told Dhaka Tribune earlier: “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. I have no idea why it nosedives at such an abnormal rate. I don't know if there is any particular reason.”
Looking at the four-month average, it is clear that savings certificate investment has fallen a lot.
Economists are saying that 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, they also observed.
September-October
A close examination of the most recent National Saving Certificate (NSC) data reveals a significant downturn in September and October.
The net sales of national savings certificates hit Tk2,305 crore negative in the total July-October period of FY24 compared with those of Tk632 crore negative in the same period of FY23.
Before October, in September net investment in the sector reached a negative Tk148 crore. In contrast, the same month in FY23 saw a negative net investment of Tk70.63 crore.
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 had increased by almost 14 times, or Tk5,160.93 crore in these two months.
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.
