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The government will depend more on National Savings Certificates (NSC) in the upcoming fiscal year of 2024-25, as per the proposed national budget compared to the revised budget of FY2023-24.
Interest payment of such savings instruments is high compared to other borrowing sources.
The government plans to borrow Tk 15,400 crore from NSC in FY25, which is 14.45 per cent or Tk 2,600 crore less compared to FY24.
Finance Minister Abul Hassan Mahmood Ali shared the plan when he presented the proposed national budget of Tk 7,97,000 crore for FY25 in parliament on Thursday.
But if compared to the FY24 revised budget, this target is very high because the net NSC borrowing target is set with negative Tk 7,310 crore. In the FY24 budget, the target was Tk 18,000 crore.
According to the latest data of Bangladesh Bank, the net selling of NSC stood at negative Tk 12,545 crore during the July-March period of FY24. The data indicates that people are withdrawing money from more NSC savings because of the high inflation rate.
Talking to The Business Post, Zahid Hussain, the former lead economist of the World Bank Dhaka Office, said, “NSC sales have decreased for two key reasons. The purchase level of investors has declined, and these shareholders are not renewing their NSCs after maturity.”
“So, the government is paying back investors instead of making sales, pushing the net position of NSCs into negative. Another reason is the many restrictions the government had imposed on NSC purchases,” he said.
