The government’s interest payment on account of its borrowing from savings instruments increased by 27 per cent in the first half of this fiscal year (FY) over that of the corresponding period of last fiscal, officials said.
The government paid Tk 45.72 billion as interest during the July-December period of FY 2014-15 compared to Tk 36.01 billion during same period of last fiscal, Department of National Savings (DNS) data showed.
The total target of paying interest against the borrowing from the savings certificates has been set at Tk 98.77 billion for the entire FY of 2014-15.
A significant rise in the government’s borrowing from savings tools pushed up its debt liability during the period mentioned, according to officials.
“The interest payment against the government’s borrowing from savings instruments has been on an increase over last few years mainly because of a continued rise in the sales of such debt tools,” a senior official of the DNS said.
The interest payment was Tk 39.42 billion during the six months of FY 2012-13 whereas it was Tk 32 billion in FY 2011-12 and Tk 30.02 billion in FY 2010-11 in the same period.
The official said reduction of yield rates on deposit schemes by commercial banks led to the rise in overall investment in the government’s savings instruments.
Presently, some banks are offering only about 7.0 to 8.0 per cent interest on their fixed deposit schemes. But DNS is offering up to 13.45 per cent interest, encouraging people to deposit in the saving tools.
Auto-reinvestment facility of some saving instruments is another cause for such development, the official added.
The net borrowing from savings instruments has already surpassed the entire fiscal’s target.
The net sales of savings certificates stood at Tk 131.35 billion in the six months of FY ’15 against the target of Tk 90.56 billion, set earlier by the Ministry of Finance for the entire fiscal year.
Besides, the net sales of the savings schemes increased 240 per cent in the July- December period of FY ’15 compared to that of matching period of FY ’14. The net borrowing was Tk 38.57 billion in the first half of FY ’14.
Officials indicated that if the sales continue, the net borrowing may stand at three times more than the fiscal target. And then government will have to pay a big amount on servicing the debt.
They also said they have already reported to the Internal Resources Division (IRD) about the impact of the current upward trend in the sales of savings tools to decide its future strategy.