The government will review and re-fix the interest rates on savings instruments twice in a year to tighten the widespread borrowing from the costly instruments as their skyrocketing sales put a dent on the economy.
April and October are the months fixed for revisions to be conducted by a nine-member committee, a senior official of the finance ministry said. The finance ministry will announce new rates for savings tools in January and October of each year.
Finance minister AMA Muhith approved the decision last week.
The latest decision on the non-bank borrowing of the government came as more than Tk 23,000 crore worth of savings certificates were sold in July-March period of the current fiscal year, which is Tk 8,000 crore more than the targeted borrowing for the whole of current 2015-16 fiscal year.
‘The mad rush for savings certificates indicates the total sales could hit Tk 30,000 crore in the current fiscal year, which is double the target,’ a top finance official told New Age.
‘The interest burden of the government will cause a huge fiscal imbalance if the rates on savings tools are not revised downwards soon,’ he said.
Earlier, the International Monetary Fund had suggested the government to stop selling the instruments as they involved higher rates of interest, and raised debt burden of the government.
Officials in the finance ministry said the dip in bank interest rates caused the spike in sales of savings certificates abnormally, as savers and small investors have no alternative areas to invest amid continuous stock market plummeting.
The ministry of finance revised the borrowing from the savings certificates from Tk 15,000 crore to Tk 28,000 crore for the current fiscal year, and set Tk 19,600 crore to be borrowed from the same source in next fiscal year.
The government in May last year slashed deposit rates on savings instruments by up to two percentage points to reduce its non-bank borrowings.
The interest rate on the five-year family savings certificates was brought down to 11.52 per cent from 13.45 per cent, the five-year pensioner savings schemes saw its interest rate slashed to 11.76 per cent from 13.19 per cent, the rate on the three-year post office savings certificates was down to 11.28 per cent from 13.24 per cent and for Bangladesh Savings Certificates, the rate was re-fixed at 11.28 per cent from 13.19 per cent.
The current rates that have been in place since May last year could be slashed by two to three per cent further, a finance official hinted.
Source: New Age
