Govt exceeds savings certificate borrowing target in first eight months of fiscal year

The government borrowing from savings certificates has exceeded its target by 10 percent in the first eight months of the current fiscal year.

According to the latest data from the Department of National Savings, savings certificates worth Tk 538.32 billion were sold between July to February of the fiscal year (FY) 2017-18, an increase of 14.22 percent over the same period a year ago.

The government paid Tk 207.12 billion as interest on its previous borrowing, making the government’s net borrowing valued Tk 331.20 billion. This is 10 percent higher than its borrowing target of Tk 301.5 billion from savings instruments in the present budget.

A volatile capital market and fall in banking interest have encouraged people to invest in the savings certificates. Even the recent increase in interest rates at several banks has not slowed down the sales of savings certificates.

Earnings from selling savings instruments are spent for various development works of the country. Savings certificates purchasers gain monthly interest on their investments. That is why, the savings instruments sale is considered as the government borrowing.

“Despite interest rates ticking up since last February, people do not have faith in banks,” Bangladesh Institute of Development Studies or BIDS Research Director Dr Zaid Bakht told bdnews24.com. “They continue to buy savings certificates because they believe them to be safe investments,”

Last May, Finance Minister AMA Muhith announced a reduction in the interest rate of savings certificates, citing the increased burden of interest for the government.

But the rates were kept unchanged after severe criticism from Agriculture Minister Matia Chowdhury, other ministers and parliamentarians during the budget session.

The interest rate of all types of savings tools was previously decreased an average of 2 percentage points on May 10, 2015 in an effort to rein in sales.