Govt borrows to pay interest amid decline in sale of saving certificates

The government is borrowing from banks to pay the interest on the previously sold saving certificate amid a decline in sale of the saving bonds due to rising cost of living, according to an official document.

According to the updated data of the National Savings Directorate, the net sales of savings certificates in the first four months (July-October) of the current fiscal year 2022-23 have been negative at Tk 632.59 crore. With the amount of savings tools sold in the four months, it was not possible to pay the interest-principal of the savings certificates invested earlier by the customers. On the contrary, Tk 632.59 crore has been repaid by the government from its treasury or by borrowing from the banking system.

With the reduction in interest rates and various austerities, the sale of savings certificates has come down to rock bottom. Because of that, the government cannot take any loans from this sector to meet development activities and other expenses.

On the other hand, the interest and principal of the saving certificates which was sold earlier have to be paid by borrowing from banks.

However, the net sale of saving certificates during July-October last fiscal year 2021-22 was Tk 9324.65 crore. In other words, in the four months, Tk 9324.65 crore was deposited in the government’s treasury even after paying the interest and principal of the customers.

The government spent this money on development activities and other expenses.

Economist Ahsan H. Mansur, executive director of the Policy Research Institute (PRI) said, “Due to reduced interest rates and the imposing of various restrictions the sale of safest investment savings bonds to the common people has decreased.”

As a result, the net sales have been negative and the government has to pay the interest, and principal from the treasury, he said.

He said, “The prince saw a drastic rise. Inflation is over 9 percent. Costs have increased in all other sectors including transport, education, and medical. This has reduced people’s ability to save. This is affecting the sale of savings bonds.”