Tk581cr savings certificates sold in April – highest in FY23

The net sales of savings certificates reached TK581 crore in April – so far the highest in FY23, according to the latest Bangladesh Bank data.

The net sales for the first 10 months of the fiscal year, however, stood negative at Tk3,579 crore as the government borrowed some Tk68,000 crore against the repayment of Tk71,600 crore during the period.

In the corresponding period of FY22, the net sales of the tools were Tk1,7518 crore.

The government set a target of borrowing Tk35,000 crore from savings tools for the ongoing financial year. It has later been reduced to Tk20,000 crore. In this calculation, the government needs a net borrowing of Tk23,579 crore in the next two months – May and June – to meet the target.

Stakeholders said lower interest rates, various investment conditions and higher inflation were the reasons behind the lower sales of saving certificates. In addition, the government also reduced borrowing from the tools to decrease its burden of interest expenses.

They, however, believe that the government's debts may increase in the next two months if it follows previous years' trends.

"The government has been paying higher interest against saving certificates than that on bank loans. Now, it is reducing the borrowing from the sector to decrease interest costs and follow the advice of the International Monetary Fund," a savings directorate official, wishing to remain unnamed, told The Business Standard.

According to the finance ministry, interest costs for savings tools were initially estimated at Tk42,675 crore for the current fiscal year. It has later been increased to Tk45,100 crore in the revised budget. 

Meanwhile, the scope for investment in saving certificates is set to be squeezed further as the government has cut the target of borrowing from the tools by 49% year-on-year to Tk18,000 crore for FY24, according to finance ministry officials.

The target is also the lowest in seven years. The previous lowest was Tk19,610 crore in FY17 when the total budget outlay was little more than Tk4 lakh crore.

Former Bangladesh Bank governor Salehuddin Ahmed said the government should neither reduce borrowing from savings certificates nor cut its interest rates "because people directly benefit from the tools and the interest money stays in the country," he told The Business Standard.

The economist also opposed the government's stance on agreeing to the IMF's conditions about savings tools borrowing.