Covid-19 limits govt borrowing from savings tools in April

The government's net borrowing from national savings certificates stood negative in April as people could not invest and reinvest in the savings instrument during the nationwide shutdown.

"In April,total fresh investment in savings certificates stood at Tk661.78 crore, and the net borrowing became negative after refunding profit and principal amounts of the previous month," the Department of National Savings said in a statement.

The figure is almost nine times lower than that ofthe previous month.In the last 16 years,the government has neverexperienced such low investment in savings tools in a month.

Data available on the central bank website showsthe gross sale of savings certificates stood at Tk676.65 crorein November 2004.

The single-month highest investment was recorded at Tk9,726.63 crorein January last year. 

LastApril, the gross sales of savings tools stood at Tk7,540.22 crore.

In March this year, when the country reported the first novel coronavirus cases, the gross sale of national savings certificates stood at Tk5,642 crore.

Savings department officials said thatdue to the countrywide shutdown enforced to curb the spread ofCovid-19, people could not go outside, transport was not easily available and banks were not open in many places, so the sales of the fiscal instrument dropped drastically in April.

Latest data shows that the government spent Tk1,283 crorein April to pay back profits and refund principle amounts of earlier investments in the savings tool.

As a result, the net borrowing from the instrument stood atnegativeTk621 crorein that month.

In December last year, for higher principal and profit payments, net salesbecame negative after 80 months,which was unthinkable even a year ago.

During the first 10 months of the 2019-20 fiscal year, the government'snet borrowing from national savings certificates stood at Tk10,580 crore, which is 88.72 percent of the revised target for meeting the budget deficit fromsavings tools.

In March,the government net loan from this instrument was 94 percent of the revised target, thanks to the negative sales in April.

Between July and April of this fiscal year, the gross sale of savings certificates stood at Tk54,578 crore, and interest payment and refund amounts were Tk43,997 crore. 

The government lowered its borrowing target from savings tools to meet the budget deficit in the current fiscal year as it had received low response from the sector. A low target has also been set for the upcoming 2020-21 fiscal year.  

In FY2019-20, the government revised down the target to Tk11,924 crore from savings tools, and the total target from non-banking sources was reduced to Tk14,924 crore.

For the upcoming fiscal year, Finance Minister AHM Mustafa Kamal has proposed a loan target of Tk25,000 crore from non-banking sources, including Tk20,000 crore from savings instruments.

Theparliamentpassed the national budget for the 2020-21 fiscal year on Tuesday.

In the first nine months of FY2018-19, the gross sales of savings certificates stood at Tk76,512 crore and net sales were Tk43,474 crore after paying interest and refunding the principal amounts.

Ahsan H Mansur, executive director of private think-tank Policy Research Institute of Bangladesh, told The Business Standard that the government did not receive as much loans as it had initially targeted from this sector in the current fiscal year.

However, the negative sales can help the government reduce itsdebt burden, he added.

He further said that this fiscal year, the government tightened the process of investing in savings schemes.

From July 1 last year, the government brought four kinds of popular savings schemes under automation, and made e-TIN mandatory for investing over Tk1 lakh in them.

A tax burden for investments of over Tk5 lakh was also put in place. Besides, the investment ceiling was set at Tk50 lakh and Tk1 crore for an individual and a pensioner, respectively.

According to people concerned, the government may rethink about withdrawing the provision for mandatory tax identification number to achieve the upcoming budgetary target from the savings tools.

However, Habibur Rahman, a joint secretaryat the Finance Division, and Shamsunnahar Begum, director general of the Department of National Savings, ruled out any such initiative.

The profit rate for national savings schemes is still around 11 percent whereas interest rate for bank deposits is 6 percent at maximum.

At the end of March this year, the government's outstanding loans increased to Tk298,287 crore.

In the FY2018-19 fiscal year, the government's net loan stood at Tk47,946 crore, which was 6.54 percent higher than the revised target of Tk45,000 crore for that fiscal year.