Saturday, November 25, 2017

Govt borrowing from savings certificates hits all-time high of Tk 470bn

  • Abdur Rahim Harmachi, Chief Economics Correspondent bdnews24.com
    Published: 2017-07-05 02:46:04 BdST

bdnews24

The government’s borrowings from saving certificates have reached a record high at Tk 470 billion in 11 months of last fiscal year.

The government had originally planned to borrow Tk 150 billion from the savings certificates, but the growing number of certificate sales prompted it to borrow more.

In the new fiscal, it has set a target of borrowing Tk 280 billion from the savings certificates as the sector has witnessed a higher deposit than in previous times.

Bonds and saving certificates are forms of debt and the government will have to repay a certain amount of interest with the principal amount.

In Bangladesh, economists say the disparity between the interest in bank deposit and savings certificate has encouraged a large number of people to buy savings certificates.

The deposit interests in banks now vary between four percent to six percent while the certificate interest rates are in double digits – 11 percent to 12 percent.

An announcement ahead of the budget by the finance minister that the certificate interest rate will be slashed in the new budget had shot up the sales even more.

In 11 months of last fiscal year ended on Jun 30, the sale of savings certificate totalled around Tk 470 billion. The figure is two and a half times more than the amount stipulated in the last budget and Tk 20 billion more than the revised budget.

Director General of National Savings Directorate Bablu Kumar Saha told bdnews24.com that in 11 months to May 2017, the savings certificate sales hit Tk 467.9 billion.

“The sales went up because of the news that interest might be slashed in the budget,” he admitted.

In the month of May, the sale was Tk 48.71 billion against Tk 44.51 billion in the previous month.

Finance Minister AMA Muhith earlier at a meeting with the business leaders said the difference between rates on bank deposits and saving certificates should not vary more than one to two percent. The difference is now four percent.