The government’s borrowing from savings certificates to meet budget deficit was nearly double the original target in the just-concluded 2018-19 fiscal year after brisk sales of the savings instruments.
Net savings certificate sales finally soared to Tk 49,939 crore against the budgetary target of Tk 26,197 crore in FY19, latest data of Directorate of National Savings suggest.
People usually see savings certificate a safe haven of investment and very lucrative for their higher interest rates compared to mid-term deposits in banks.
A bearish capital market and some other factors also contributed to blistering sales of government-operated savings certificates, analysts say.
In FY19’s national budget, the government set the borrowing target from the saving tools at Tk 26,197 crore. But the bar was raised later to Tk 45,000 crore after high sales trend.
With the sales, the government’s current total borrowing from savings certificates stood at Tk 288,000 crore.Yearly sales in the last fiscal year were Tk 3,409 crore higher than Tk 46,530 crore sales in FY17-18 which also crossed Tk 44,000 crore revised sales target by a large margin.
The situation was worse in FY16-17 as yearly sales finally swelled as high as to Tk 52,417 crore.
Economic analysts are very critical of this trend, saying that huge borrowing from savings certificates leads to a debt burden for the government as the tool bears high-interest rates.
They also suggest the government to go for foreign loans because these loans usually bear much lower interest rates compared to that of savings certificates.
But the government thinks that the savings certificates have social security aspects as they safeguard retires persons or middle and lower-middle-income people who don’t have other investment options.
However, there is also a widespread criticism that the well off segments of the society is benefiting from investing in savings certificates.
In view of this, the government has put in place several regulations on savings certificate sales from this year, including making it mandatory to submit NID cards.
Submission of tax identification number (TIN) and bank account number has been made mandatory for buying over one lakh taka certificate. Source tax on interest for over Tk 5 lakh certificates has been raised from 5 per cent to 10 per cent.
Besides, a central database has been created to fend off buying of savings tools beyond the limit. In May 2015, the government also cut interest rates by 2 per cent to discourage the sales.
The government thinks that the steps are likely to bridle the sales while the targeted group will be the main beneficiary of the scheme.
For FY19-20 budget, the government has set a lower target of borrowing Tk 27,000 crore from savings certificate sales.
Currently, interest rates range from 11.04 per cent to 11.76 per cent for different types of savings certificates.