Dhaka, Bangladesh (BBN)- Bangladesh government’s borrowing from its savings tools increased by 5.65 per cent or BDT 6.89 billion in the first quarter (Q1) of this fiscal year (FY) to finance partly budget deficit.
Net sales of savings instruments rose to BDT 134.12 billion during the July-September period of the FY 2018-19 from BDT 126.94 billion in the same period of the previous fiscal, according to the data available with Department of National Savings (DNS).
During the period under review, the net sales of savings tools exceeded more than 50 per cent of the total target set by the government earlier for the FY 19.
The current fiscal year's total target for net borrowing from savings instruments was set at BDT 261.97 billion.
Higher yield on the savings instruments pushed up it sales in the recent years, according to insiders.
As the people do not have better investment options, they prefer the tools to utilise their hard-earned money, they said.
The government's interest payment is also increasing simultaneously due to huge investments in the savings tools.
The government paid BDT 54.36 billion as interest in the first three months of FY 19, according to the official figures.
However, the government has no immediate plan to curb investment in its savings instruments through reducing the yield on the sachems.
Besides, the government is planning to introduce a database of savings certificates from early next fiscal year, officials said.
After introduction of the databank, NIDs will be made mandatory for the savers to invest their money in these savings instruments, they added.
Due to higher yield on the tools, many savers are investing their money especially in Family Savings Certificates using the names of their different female members.
The DNS always encourages small savers as the aim of the savings certificates is to ensure financial security for lower and medium income groups.
The DNS sells four types of savings certificates and the yield on the tools are up to 11.76 per cent.
An individual is allowed to buy family savings certificates up to BDT 4.5 million. The thresholds for other schemes, including pensioners, are between BDT 5.0 million and BDT 6.0 million.
It also sells different types of bonds for expatriate Bangladeshis.
Better yield on the savings instruments than bank deposits are encouraging the small savers to invest more in the risk-free instruments.
Currently, average interest rate on deposit, offered by the commercial banks, is around 6.0 per cent, while the rate for savings instruments is paid on an average nearly 12 per cent, according to the market operators.
BBN/SSR/AD