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Dhaka Tribune

Taxpayers to pay more for savings interest than for education, defence

Update : 30 May 2017, 11:31 PM
In the coming fiscal year, taxpayers will have to pay more to fund government interest on savings instruments than they will for education or defence, said an official of the Finance Division. The total interest payment expenditure in the 2017-18 fiscal year is going to increase by 29.15% compared to the allocation in the revised budget of 2016-17, which means the allocation for interest payment is going to be more than Tk40,000 crore. Most of that allocation will be spent to pay interests to the owners of savings instruments, the official told the Dhaka Tribune on Saturday, requesting anonymity. The amount of the allocation is set to be Tk41,457 crore – Tk8,594 crore more than the current year's revised budget allocation. The amount of interest payment under the revised budget for 2016-17 fiscal year stands at Tk32,863 crore, while the allocation was Tk39,951 crore. The government is also likely to reduce the interest rate on savings instruments and, owing to that move, there may be a surge in encashment of those instruments, the official said. Most savings instruments come with 11-13% interest. There is no limit as to how many instruments are sold to the public, which results in massive debt for the government. The Finance Division official said the next budget paints a troubling picture as the payment of interest expenditure is 30.95% of the budget deficit. Finance Minister AMA Muhith has said the government plans to take more loans from the banks for cheap funds to meet the next fiscal deficit. According to the new budget estimation, the deficit will be Tk112,000 crore. This is a major fiscal management failure on the government's part, said economist AB Mirza Azizul Islam. “The government loans from savings instruments is definitely out of control. State agencies need to fix the amount of loans from the savings instruments,” he told the Dhaka Tribune. The Finance Division official disagrees. “Loans from the saving instruments are the last resort for the government, since these are a source of income for retired citizens,” he said.
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