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Dhaka Tribune

Savings certificate rates may come down in FY16

Update : 05 Apr 2015, 06:45 PM

Finance Minister AMA Muhith yesterday dropped a broad hint that the interest rates on government savings certificates would come down in the next fiscal year.

“The interest rate of savings certificates will be reviewed in the next budget,” he told a pre-budget meeting with think-tanks at the NEC conference room in Dhaka yesterday.

“Interest rate of savings certificate is very high in the country. If it continues, the debt burden of the government will be increased, which is not expected.”

Muhith said people rush to subscribe savings instruments due to higher interest rates and the government has already taken loan from this scheme more than its target. “If it continues to happen, fiscal management might fall in trouble.”

On lowering interest rates of bank loans, he said bankers are the investors who could fix the interest rates.   

He also hinted that the coming budget size will be near to Tk3 trillion. “But we are yet to fix the figure.” The size of the current fiscal’s budget is Tk2.50 trillion. 

The minister was speaking in response to the suggestions of economists from various research groups. 

He came down heavily on the public enterprises for depositing earnings to their own bank accounts warning stern actions against such practices.

“This is illegal and absolutely against financial discipline,” he said while delivering his speech in a per-budget discussion with some.

“We have to stop it completely and punishment like imprisonment will be given to them that will keep their earnings,” he said.     

It is mentionable that many organisations like Bangladesh Telecommunication Regulatory Commission and Bangladesh Security Exchange Commission have earned by imposing huge financial punishment on the errant companies but could not deposit to the government exchequer.

Policy Research Institute Executive Director Ahsan H Mansur said the country failed to accrue macroeconomic dividend because of sluggish investment despite economic growth. 

He adds that the economic growth increases but investment to GDP ratio declines. Investment needs to be raised by lowering interest rate and attracting foreign direct investment (FDI).    

He said some Tk77,000 crore have been given to 61 corporate houses. “It is a serious problem of loan allocation, resulting in income inequality.

“Banks are solely responsible for income inequality. Close surveillance is needed for such loan allocation to address income inequity”

He suggested allowing FDI in RMG sector for boosting investment as 34% minimum investment is needed to achieve 8% growth. “Bangladesh also needs to attract 3% FDI to GDP. In comparison,  Vietnam attracts 7%-8%  FDI to its GDP.” 

BIDS research director Binayak Sen put importance on improving communication both in urban and rural areas to bring dynamism in economic activities. He also suggested that loss-making state-owned organisations should be divested for turning them profitable. “All banks without Sonali might be handed over to the private sector.”   

BIDS researcher Kazi Shahabuddin Ahmed said, “To ensure long-term food security, we need environment-friendly and sustainable agriculture system.”

About rice exports to Sri Lanka, he said it would not be potential for the country in the long-run. 

He also suggested proper use of land and water, use of agriculture machine, access to finance for boosting both farm and non-farm agriculture production.

Kazi Shahabuddin stressed developing infrastructure rather than giving subsidy in the agriculture sector to get more return.

PRI Chairman Zaidi Sattar said the main challenge of the next budget at this critical juncture is to come out of growth cycle of 6% seen by the country over the decades. 

“That should be the critical focus in the next budget.” 

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