Govt borrows 51% of target thru’ savings certificate sales in 9 months

Highlights:

• Govt borrowed Tk16,504 crore in July-March
• The annual target amounts to Tk32,000 crore
• Borrowing from sales of savings instruments dropped for slow ADP spending 
• Interest rate reduction also has had impact on sales 
• Interest rates on all kinds of savings certificates cut by 1-2%

The government borrowed only 51% of its target through sales of national savings certificates in the first nine months of FY22, because of higher interest rates and slow spending on projects under the annual development programme.

Till March this fiscal year, it accumulated Tk16,504 crore from selling savings tools against its annual borrowing target of Tk32,000 crore for deficit financing.

According to sources, the government's net debt in the form of savings tools amounted to Tk3,628 crore in August of the current fiscal year. In just a month, this net debt went down to Tk2,825 crore in September. 

The downward trend continued through the next two months, massively causing the net debt to drop to Tk766 crore in October, Tk701 crore in November. In December, the government repaid Tk436 crore without borrowing.

However, in the new year, the whole picture has changed. The government borrowed Tk2,586 crore in January, Tk2,522 crore in February and Tk1,814 crore in March.

Fahmida Khatun, executive director at the Centre for Policy Dialogue, told The Business Standard, "The government has reduced sales of savings certificates as interests on such instruments are higher than on bank loans." 

"The money borrowed through sales of savings tools is spent on development projects that see slow implementation in the current fiscal year. That is why the net borrowing is low," she added,

The government has set ADP spending target at Tk217,000 crore in FY22, but in the first nine months, ADP spending stood at Tk98,934 crore or only 45.56% of target.

On condition of anonymity, an official of the National Savings Directorate said, "The cut in interest rates of savings certificates has had some effect on sales in the last few months. Even though sales and net debt increased in the first three months of 2022, this is still less than in the previous year."

Earlier, the government cut interest rates on all kinds of savings certificates by 1-2%.

According to sources, in the first nine months of FY22, total investment in savings certificates amounted to Tk81,326 crore. The government spent Tk64,822 crore to pay off principal and interest during this time.

In FY21, the government's net debt in savings certificates was Tk41,959.54 crore, while the government's borrowing target in the original budget of that fiscal year was Tk20,000 crore.