THE government has borrowed Tk 17,577 crore, 70 per cent of the total target, to meet the budget deficit for the fiscal year 2020-21 from Sanchayapatra scheme just in four months (July-October). To meet a portion of the budget deficit, its total borrowing target from savings certificates was set at around Tk 225,000 crore. According to a news report on Friday, during the same period of the last fiscal, its borrowing was only Tk 7,326 crore. But this year’s borrowing is 140 per cent more then that of the last fiscal.
However, the government’s borrowing from the country’s banking system has dropped during the same period, bringing down the government’s net borrowing to 1062.90 crore. It has set a target of borrowing Tk 84,980 crore from scheduled banks for the current fiscal.
It is to be noted that besides borrowing from Sanchayapatra, the government also received funds from different autonomous, semi-autonomous and state-owed entities that helped it meet deficit financing. The budget deficit was already widening before the pandemic — from 3.4 per cent of GDP in 2017 to 5.5 per cent of GDP in 2019.
Traditionally, Bangladesh’s fiscal strategy has been to keep the budget deficit to less than 5 per cent of GDP, the bulk of which is financed through the National Savings Certificate, and external financing amounting to about a fifth of total financing need.
Currently, the Department of National Savings is offering four types of savings schemes – 5-year Bangladesh Sanchyapatra, 3- month Profit bearing Sanchayapatra, Family Savings Certificate and Pensioner Sanchayapatra.
Though the higher borrowing from savings tools would be a burden for the banking system, it would provide a relief to the middle-class people, as they are the main buyers of savings certificates. The highest interest rate for savings instruments is near 12 per cent but the government can borrow funds at 8 to 9 per cent from banks.
People belonging to the middle class are suffering the most during the pandemic as like lower-income people they cannot seek any assistance and are forced to reclaim their investments, at least partially. We think the government’s more borrowing from savings would directly or indirectly help this class of people who are still depending on the interests of their savings certificate to lead their day-to-day living.
However, the government’s borrowing from the country’s banking system has dropped during the same period, bringing down the government’s net borrowing to 1062.90 crore. It has set a target of borrowing Tk 84,980 crore from scheduled banks for the current fiscal.
It is to be noted that besides borrowing from Sanchayapatra, the government also received funds from different autonomous, semi-autonomous and state-owed entities that helped it meet deficit financing. The budget deficit was already widening before the pandemic — from 3.4 per cent of GDP in 2017 to 5.5 per cent of GDP in 2019.
Traditionally, Bangladesh’s fiscal strategy has been to keep the budget deficit to less than 5 per cent of GDP, the bulk of which is financed through the National Savings Certificate, and external financing amounting to about a fifth of total financing need.
Currently, the Department of National Savings is offering four types of savings schemes – 5-year Bangladesh Sanchyapatra, 3- month Profit bearing Sanchayapatra, Family Savings Certificate and Pensioner Sanchayapatra.
Though the higher borrowing from savings tools would be a burden for the banking system, it would provide a relief to the middle-class people, as they are the main buyers of savings certificates. The highest interest rate for savings instruments is near 12 per cent but the government can borrow funds at 8 to 9 per cent from banks.
People belonging to the middle class are suffering the most during the pandemic as like lower-income people they cannot seek any assistance and are forced to reclaim their investments, at least partially. We think the government’s more borrowing from savings would directly or indirectly help this class of people who are still depending on the interests of their savings certificate to lead their day-to-day living.
