Home ›› 31 Oct 2022 ›› Front
The economy is supposed to be recovering from the impacts of the Covid-19 pandemic since the situation started returning to normal, but the cost of living has risen due to inflationary pressures and that is affecting the lives of people from the lower-middle and middle classes.
People are withdrawing their savings under the national saving certificate (NSC) scheme to meet living expenses. But they are failing to save enough money again to try and buy saving certificates, which has led to a significant drop in the net saving certificate sale in the last nine months.
According to data from the National Savings Department (NSD), the total sale of NSC during the first quarter (July-September) of the ongoing financial year of 2022-23 was Tk 21,511 crore.
Against that, at the same time, the government has paid Tk 21,180 crore as principal of NSC, leaving the net sale at only Tk 330 crore.
During the same period of the last financial year (FY2021-22), Tk 26,605 crore worth of NSCs were sold, where repayment of principal of matured NSC was Tk 18,047 crore. That had left the net sale at Tk 8,558 crore.
The net saving certificate sale was negative Tk 436 crore in December last year because of the pandemic. Meanwhile, the net sale amount was negative Tk 70 crore in September this year.
In September, there was more liquidation than the sale of NSC. Even though savers bought NSCs worth Tk 6,973 crore, the amount of withdrawn investment was Tk 7,043 crore. That’s why net sale in September this year was negative. The net sale was Tk 2,825 crore in September last year.
The statistics appeared more real when this correspondent talked to a saver named Saiful Alam, who works for a private company, at Motijheel on Sunday. He was there to encash a family savings certificate of Tk 5 lakh that has matured.
“I thought I will reinvest this money again in January. But all in all, the living cost has increased so much that I have no other option but to withdraw the accumulated money. I don’t know when I will be able to save again,” he said.
Prominent economist Ahsan H Mansur, the executive director of the Policy Research Institute of Bangladesh, told The Business Post that due to the inflationary pressure, people’s savings are decreasing as they are struggling to meet the rising living cost. “That’s why they are not buying new saving certificates.”
“Those with comparatively low incomes are under more pressure and withdrawing investment from their NSCs becoming desperate. On the other hand, those who have money are not encouraged to buy savings certificates due to various restrictions,” he added.
Inflation and other impacts
After the pandemic eased, import costs massively increase as domestic demand went up and commodity prices in the international market rose due to the Russia-Ukraine war. All these kicked off the dollar crisis. As a result, inflation has been on the rise since April this year. It reached 7.48 per cent in July, 9.52 per cent in August, and then September recorded a 9.10 per cent rate, which was the highest in the last decade. Inflation has also affected bank deposits as the cost of living rose and the interest rates on deposits are below the inflation rate. Customers are losing interest in keeping money in the bank. According to Bangladesh Bank data, the outstanding amount of deposits in the banking sector was down to Tk 14,68,937 crore in August this year from Tk 14,71,673 crore in July.
Budget deficit and NSC
To meet the deficit in the national budget, the government borrows directly from the people by selling national savings certificates. However, their high-interest rate also increases the government’s interest expenses.
Therefore, to discourage excessive NSC purchases since the last fiscal year, the government has made the submission of tax certificates mandatory and reduced the purchase limit.
Ahsan H Mansur feels the sale of savings certificates has decreased compared to earlier due to this reason. For the current year, the government aims to sell Tk 35,000 crore in NSCs. The amount of the FY23 budget deficit is Tk 2.45 lakh crore. To meet this shortfall, the government’s borrowing target was set at Tk 1.0 6 lakh crore in the budget from banking sector. However, the net amount taken by the government from the bank in the first three months (July-September) of FY23 is Tk 12,526 crore.
