Don’t overburden future generations with huge public debt

A media report on Friday said the government’s bank borrowing declined sharply in the just ended fiscal year as it took a staggering amount of debt through sales of national savings certificates, bonds and such others. Bank borrowing plunged to Tk 26,078 in the last fiscal 2020-21 from the revised target of borrowing of Tk 79749 crore during the year. The plunge is reported at 64 per cent.
The government evidently borrowed less from banks as many savers flocked to buy savings certificates and bonds due to decline in the interest rate on bank deposits. People get 11.04 per cent to 11.76 per cent interest by putting money in saving certificates while banks offer 3-5 per cent interest on fixed deposits. Obviously nobody wants to lose so much, particularly people who live on income from their saving before and after retirement. Reducing lending rates to single digit forced banks to drastically cut interest on deposits and this in turn forced savers to switch to saving certificates.
The government usually goes for short term borrowing from banks for funding the annual development programme but since its implementation hits snags amid the pandemic, lower borrowing from banks occurred last year and may continue this year as well. On the other hand the government is going for more long term borrowing, though at huge interest since it is not required to pay immediately. So it is taking up mega projects and other non-productive expenses assuming the future generation will repay. It keeps pressure away from the government and also allows the rich, many of whom have illegally amassed money to put their fund at high interest bearing government loan to spill up their saving every year. The government had banned unrestricted buying of national saving certificates two years ago because of its high budgetary liability on debt servicing. But the decision was rescinded informally in short time apparently on pressure from the rich to buy saving certificates to redouble their savings. The government also finds it easier to finance big projects.
We would say funding unworthy projects and making easy high cost debt that would require the future generation to pay is an immoral act and unacceptable. Public finance is a critical act of balancing between productive and unproductive expenses and the present and future liability. We must therefore act prudently.