Government borrowing from savings tools declines as inflation bites

Government borrowing on savings certificates has declined due to ongoing inflation and low annual development spending, according to central bank data.

From July to September, the three months of the current fiscal year, the government’s net lending from the sale of savings certificates amounted to Tk 330 crore, less than 1% of the lending target. exercise of 35,000 crores of Tk.

In the same period of the previous financial year, the government’s net borrowing from savings certificates was Tk 8,558 crore, which is Tk 8,228 crore more than this year.

Insiders say the government is cutting all types of spending as part of the tight monetary policy. At the same time, repayment of the cash voucher loan increased.

At the same time, consumers are holding more cash on hand for the future, which has led to a decline in cash voucher sales.

According to the central bank report, in the first three months of the current financial year, the government borrowed Tk 21,511 crore from savings certificates and repaid Tk 21,180 crore from earlier loans.

While in the last fiscal year 2021-22, the government borrowed Tk 26,605 crore on savings certificates and repaid Tk 18,047 crore.

Fahmida Khatun, executive director of the Center for Policy Dialogue (CPD), told The Business Standard that the middle class typically buys savings certificates.

“The increasing rate of inflation in the country has increased the consumption of the middle class and reduced the amount of savings. In addition, the government is repaying previous loans at a higher rate, which has led to a decrease in savings certificate lending,” she said. .

According to data from the Bangladesh Bureau of Statistics, inflation rose to 9.5% last August due to the supply chain disruption triggered by the war between Ukraine and Russia and the increase the price of fuel oil. In September, inflation fell to 9.1%.

The last time the inflation rate exceeded 9% was in the 2010-2011 fiscal year.

Government annual development expenditure data shows that the government development expenditure target for the current year is Tk 2.56 lakh crore. In the first three months of the current fiscal year, it spent only Tk 9,843 crore, only 3.85% of the target.

According to Central Bank data, the amount of money in people’s hands was Tk 2.13 lakh crore in August 2021, while in August 2022 the amount was Tk 2.41 lakh crore – which means people are keeping 13% more cash on hand compared to the previous year.

Meanwhile, government borrowing from the central bank has increased, but repayment is higher than borrowing from regular banks.

According to central bank sources, in the first three months of the current financial year, the government took a net borrowing of Tk 12,526 crore from the banking system, which was Tk 4,218 crore during the same period of the previous year.

Meanwhile, the government has borrowed Tk 16,833 crore from the central bank in the current year.

The government’s domestic borrowing target for FY23 has been set at Tk 1,46,335 crore in the national budget. Of the total, the borrowing target from the banking system was set at Tk 1,06,334.

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