Govt borrowing from savings tools drops as inflation bites
During the same period of the previous fiscal year, the government’s net borrowing from savings certificates was Tk8,558 crore, which is Tk8,228 crore more than this year
The government's borrowing from savings certificates has decreased due to the current inflation and low annual development expenditure, according to the central bank data.
From July to September, the three months of the current fiscal year, the government's net loan from selling savings certificates stood at Tk330 crore, which is less than 1% of the fiscal year's target of Tk35,000 crores.
During the same period of the previous fiscal year, the government's net borrowing from savings certificates was Tk8,558 crore, which is Tk8,228 crore more than this year.
Insiders say, the government is reducing all types of expenditure as part of contractionary monetary policy. During the same time, repayment of the savings certificate loan increased.
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At the same time, consumers are holding more money at hand for the future due to which the sale of savings certificates has decreased.
According to the central bank report, in the first three months of the current fiscal, the government has borrowed Tk21,511 crores from savings certificates and paid back Tk21,180 crores of previous loans.
Whereas in the last fiscal year 2021-22, the government took a loan of Tk26,605 crores from savings certificates and paid back Tk18,047 crores.
Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), told The Business Standard that usually the middle-class purchases savings certificates.
"The rate at which inflation in the country is increasing has increased the consumption of the middle class and reduced the amount of savings. Besides, the government is repaying previous loans at a higher rate due to which savings certificate loans have decreased," she said.
According to the data of Bangladesh Bureau of Statistics, inflation increased to 9.5% last August due to the supply chain disruption triggered by the Ukraine-Russia war and the increase in the price of fuel oil. In September inflation decreased to 9.1%.
The last time, the inflation rate went above 9% was in FY 2010-11.
The government's annual development expenditure data shows the target of government development expenditure for the current year is Tk2.56 lakh crores. In the first three months of the current fiscal year, it has spent only Tk9,843 crores, which is only 3.85% of the target.
According to Central Bank data, the amount of cash in the hands of people was Tk2.13 lakh crores in August 2021 while as of August 2022, the amount is Tk2.41 lakh crores – meaning people are keeping 13% more cash in hand compared to the previous year.
Meanwhile, the government's borrowing from the central bank has increased, but the repayment is more than the borrowing from the scheduled banks.
According to central bank sources, in the first three months of the current fiscal, the government has taken a net loan of Tk12,526 crore from the banking system, which was Tk4,218 crore in the same period of the previous fiscal year.
At the same time, the government has borrowed Tk16,833 crore from the central bank in the current year.
Target of Government Domestic Borrowing for FY23 has been set at Tk 1,46,335 crore in the national budget. Of the total, the target of borrowing from the banking system has been set at Tk 1,06,334.
