Government net debt down

The State’s net indebtedness in savings certificates has been falling for three months due to higher loan repayments than borrowings.

According to Bangladesh Bank data, government net debt in savings certificates stood at Tk 3,628 crore in August of the current fiscal year. Within a month, net debt decreased to Tk 2,825 crore in September. The downward trend continued over the following two months, massively reducing net debt to Tk 701 crore in November.

Meanwhile, despite the continued decline in net debt, the sale of certificates of deposit has not declined dramatically. A total of Tk 8,941 crore of savings certificates were sold last November through banks, savings offices and post offices, an increase of Tk 229 crore from the previous month . However, sales were much higher in September, a total of Tk 2,404 crore higher than November sales.

Market insiders, however, say major policy shifts, including lower interest rates, played a significant role in the upward trend in net debt reduction in savings certificates.

The government reduced the interest rate on all savings certificates by around 1% for investments above Tk 15 lakh in September.

The government has set a target to sell Tk 1,24,647 crore of savings certificates for the current financial year to cover the budget shortfall for the financial year. Out of this amount, the target for taking out a net loan, after repaying the principal and interest due, is Tk 32,000 crore.

According to Bangladesh Bank data, in the five months from July to November of the current financial year, the total savings certificates sold were worth 44,269 crore taka, or 35.51% of the target of the government.

Meanwhile, net lending by the government on savings certificates amounted to Tk 10,025 crore, compared to the amount of Tk 11,608 crore in the first three months of the previous fiscal year.

Calling the decline in government savings certificate debt a positive side, the Policy Research Institute’s Executive Director, HM Mansur, said: “I would suggest reducing it [net debt] any further. Because the government has to pay more interest here, which would be much less in the banking sector.”

Meanwhile, the government has taken out loans amounting to Tk 33,379 crore from banks in the first six months of the current financial year, of which Tk 12,598 has been used to repay earlier loans, bringing the net debt at 18,781 Tk. crore in the banking sector.

Typically, the government borrows from foreign and domestic sources to fill the budget gap. The target for borrowing from the domestic sector in the current financial year is Tk 1,13,453 crore. Out of this amount, the government will borrow Tk 76,452 crore from the banks,

Tk 32,000 crore from National Savings Certificate and Tk 5,001 crore from other sectors.

Ann J. Cox