Savings certificates sale witnessed negative growth

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Staff Reporter  :
Savings certificates sale significantly declined in the first nine months (July-March) of the current financial year of 2022-23. The sales volume is so low that it is not even possible to pay interest and principal of the savings bonds invested earlier by customers.

The government sells Tk 62,657 crore savings certificates from July to March in FY23 while it paid a total of Tk 66,819 crore for earlier sold bond’s principal and interest referring government paid Tk 4,161 crore from the exchequer to meet earlier loan obligation, according to the recent data from Department of National Savings.

Earlier, government targeted to borrow Tk 35,000 crore by selling savings bonds to meet the budget deficit in the current financial year which is now out of reach. Even in six months, government did not borrow any loan from this sector.

According to financial experts, as the current interest rate is not enough to cover the ongoing inflation, investors are not finding any incentive to invest on savings certificates. As a result, they are not encouraged to buy saving bonds throughout the current financial year.
On the other hand, government now prefers borrowing form banking sector rather than selling savings certificates as bank offering relatively low rate of interest. Due to these reasons, the sale of savings bonds has collapsed, they added.

In March this year total savings bonds were sold for Tk 6,795 crore. However, the government paid Tk 7,447 crore for principal and interest on earlier loan which referred more than Tk 652 crore has been paid than the sale of savings bonds. In the same month of the last fiscal year, the net savings bonds sale was Tk 1,815 crore.

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According to National Savings Department, since September last year, the amount of redemption has been higher than the sale of savings bonds. In the first month of January, the net sale of savings certificates was Tk 37.43 crore, in February it was negative to Tk 440 crore. Last December, the net sales of savings bonds were negative at Tk 1,491 crore.

The government received fewer loans from selling saving bonds in the last fiscal year as well. In 2021-22, it borrowed Tk 19915 crore against the target of Tk 32,000 crore. However, even during the Corona period, the net investment of savings certificates was around Tk 42,000 crore in fiscal 2020-21.

As the government has increased borrowing from the banking system. In the current fiscal year, it has target of taking a total loan of Tk 1.06 lakh crore from banking system. Due to non-availability of loans from savings bonds, for low interest rate the government has to borrow more from banks.

Which resulted, liquidity crisis in commercial bank, Bangladesh Bank is now providing the entire domestic loan to the government. From July to March of FY23 the government has taken a loan of Tk 50380 crore from the central bank while the amount of borrowing taken from commercial banks amounted to Tk 1,980 crore.

In the period mentioned above the governments net bank debt stood at around Tk 52,360 crore. In the last fiscal of FY’22 government borrowed a huge amount from the banking system where the bank loan amounted to Tk 72,750 crore.

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