Savings certificate: Govt’s net debt on the decrease

The government's net debt in savings certificates has been going downwards for the last three months owing to more loan repayment than borrowing.

According to Bangladesh Bank data, the government's net debt in savings certificates amounted to Tk3,628 crore in August of the current fiscal year. In a month's gap, the net debt decreased to Tk2,825 crore in September. The downtrend continued through the next two months, massively reducing the net debt to Tk701 crore in November.

Meanwhile, despite the net debt falling continuously, the sale of savings certificates has not decreased in staggering numbers. A total of Tk8,941 crore worth of savings certificates were sold last November through banks, savings bureaus and post offices, an increase of Tk229 crore compared to the previous month. However, sales were much higher in September, a total of Tk2,404 crore more than the November sales.

Market insiders, however, say major policy shifts, including decreasing interest rates, have played a big role in the rising trend of lowering net debt in savings certificates. 

The government cut the interest rate on all savings certificates by around 1% for investments above Tk15 lakh in September.

The government has set a target of selling Tk1,24,647 crore worth of savings certificates for the current financial year to meet the budget deficit of the fiscal year. Of this, the target for taking a net loan, after repaying due principal and interest, is Tk32,000 crore.

According to the Bangladesh Bank's data, in the five months of July-November of the current fiscal year, the total savings certificates sold was worth Tk 44,269 crore or 35.51% of the government's target.

In the meantime, the net loan taken by the government from savings certificates has amounted to Tk10,025 crore, while the amount was Tk11,608 crore in the first three months of the previous financial year.

Terming the drop in govt debt from savings certificates as a positive side, Policy Research Institute Executive Director HM Mansur said, "I would suggest reducing it [net debt] further. Because the government has to pay more interest here which would be a lot less in the banking sector."

Meanwhile, the government took loans to the tune of Tk33,379 crore from banks in the first six months of the current fiscal year, of which Tk12,598 have been used to pay back loans from before, bringing the net debt to Tk18,781 crore in the banking sector.

Generally, the government borrows from foreign and domestic sources to meet the budget deficit. The target for borrowing from the domestic sector in the current financial year is Tk1,13,453 crore. Of this, the government will borrow Tk76,452 crore from banks,

Tk32,000 crore from the National Savings Certificate, and Tk5,001 crore from other sectors.