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Sales of savings certificates soar: Non-bank borrowing budgetary target reaches 83% in five months

  • Published at 11:40 pm January 13th, 2019
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Dhaka Tribune

According to data, in July-November of FY19, savings certificate sales increased 2.31% or Tk489.86 crore, in comparison with that of the same period of the previous year

Sales of savings instruments have soared in the first five months of the current fiscal year, as the lucrative tools fetched Tk 21,661.93 crore during the period, or nearly 83% of the yearly target.

Meanwhile, the skyrocketing non-bank borrowing of the government would enhance the debt burden of the government, economists said.

They believe high yields on national savings certificates (NSCs)are encouraging a large number of small investors and pushing up the government's debt burden.

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

“When the budgetary targets are met, the government should stop selling savings instruments. We saw that last year sales were more than the target. But the government did not stop selling,” he added.  

According to the latest data of the Directorate of National Savings Certificates,the net sales of  savings certificates increased to Tk21,661.93 crore in July-November of FY19, against Tk21,172.07 crore in the same period of FY18.

If the trend continues for the rest of FY19, the government’s fund collection from NSC sales might reach twofold of its initial target of Tk 26,197 crore net sales.

According to data, in July-November of FY19, savings certificate sales increased 2.31% or Tk489.86 crore, in comparison with that of the same period of the previous year.

The rates offered by the NSCs are between 11.04% and 11.76%. On the other hand, banks are offering much lower interest rates,while many of them are giving 4-6% interest against deposit products,with a view to reduce lending rates to facilitate investment following an initiative from government high-ups.

Last year, the Bangladesh Association of Banks (BAB) had taken a decision to lower the interest rate on savings and lending to 6% and 9% respectively from July 1, which lured savers to park their funds with government tools. In contrast, the interest rate on savings certificates ranged from 11.04% to 11.76%. 

At a meeting with the chairmen and managing directors of banks on August 2, 2018, immediate past finance minister AMA Muhith hinted at lowering the interest rate on savings instruments.But he backtracked soon after, saying the new government, which would take office following the national electionon December 30, will take the decision in this regard.

The government’s net borrowing from the savings certificates was Tk46,530.30 crore in2017-2018,against its revised target of Tk44,000 crore for the fiscal year. The initial target for FY18 was Tk30,150 crore.