Staff Correspondent

Investments in National Savings Certificates have declined further as a 51% drop in the sales of the savings tools was registered in the first six months (July-December) of the current fiscal year with experts attributing this to rising food bills due to the continuous rise in prices of essential commodities.

According to the Bangladesh Bank (BB) data, the net investment reached a negative Tk6,063 crore during the period against negative Tk3,107 crore during the corresponding period of fiscal year 2022-23.

Dr Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, told the Daily Sun that the country's economic situation worsened further last year.

"The inflation has been rising steadily, reaching nearly 9%-10%. Food inflation has surged to 12%. People's earnings are not keeping up with the rising costs. How can they save? What can they buy savings certificates with? That's why the sales of savings certificates are continuously decreasing," he said.

Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office, believes the rising inflation has inflicted economic hardship on many. "In times of inflation, many people are under stress. In the latter six months of the last year, all the sectors of the economy were affected due to the political unrest. Many have withdrawn deposits for livelihood."

Despite a targeted inflation rate of 6% in the current fiscal year's budget, the actual inflation exceeded expectations, hovering at over 9% since March of the previous year. The overall inflation was at an eight-month low of 9.41% in December, according to the Bangladesh Bureau of Statistics.

In December, non-food inflation was 8.52% and food inflation was 9.58%.

According to the BB data, the net investment in savings certificates in the first two months (July-August) of FY24 increased, surpassing the figures from the corresponding period in FY23 by a staggering 14 times.

The net sales stood at Tk3,250 crore and Tk2,312 crore in July and August respectively. In the two months, more savings certificates were purchased than redeemed.

However, September witnessed a sharp decline in sales. Investment in the sector reached a negative Tk148 crore in the month.

The investments dropped further later with the net investment reaching a negative Tk1,040 crore in October, negative Tk1,553 crore in November, and negative Tk2,204 in December.

The net sales of savings certificates are what remains after paying the interest and principal on the savings certificates sold previously. For this reason, in economic terms, the net sales of savings bonds are considered a 'debt' or 'borrowing' of the government.

That means interest-principal repayments on earlier sold savings bonds have increased more than new investments in savings certificates. The government repaid Tk6063 crore more than the amount of savings bonds sold in these six months. This amount is paid from the government treasury or by borrowing from banks.

In FY24, the government is planning to take a loan of Tk18,000 crore by selling savings certificates.

In FY23, the government had set a target to borrow Tk35,000 crore from savings bonds to bridge the budget deficit. However, due to many factors such as austerity measures, reduced interest rates and inflation, the government faced challenges in attracting savings, which resulted in reduced sales. Consequently, the revised budget lowered the target to Tk20,000 crore.

However, by the end of the financial year, the government did not get a single penny in loans by selling savings certificates. Instead, it had to pay Tk3,296 crore from the exchequer or borrowing from the banking system to cover the interest on previously sold savings bonds.

In the last fiscal year, savings bonds worth Tk80,859 crore were sold while a total of Tk84,155 crore was spent on interest and principal repayments.