Govt mulling reduction in savings tool interest rate

FE Team | Published: September 17, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Shakhawat Hossain
The government is likely to reduce interest rate on the national saving instruments in line with suggestion from the International Monetary Fund (IMF), sources said.
The existing interest rate of 11 per cent on the national saving instruments may be brought down to the level of interest rate on the government treasury bills.
The visiting officials of the Washington-based multilateral agency have also suggested the MoF to check the excessive government borrowings, sources added.
By giving such suggestion, the IMF is basically trying to make one of the most effective tools to mobilise funds ineffective, said a senior MoF official.
In case of any decline in interest rates, the people will feel discouraged from investing in saving instruments and divert funds to other investment avenues offering higher benefits, he said.
The official pointed out that the government might not find sufficient money to borrow from the non-banking sources as the investment on the National Saving Document (NSD) would reduce substantially.
Due to lower than expected revenue income by the national board of revenue (NBR) in the last fiscal, the government had to borrow some Tk 85.89 billion from banking and non-banking sources.
Of the amount, the government borrowed almost a half from the non-banking sources. It was forced to do so following an agreement with the IMF not to cross certain ceiling of bank borrowings.
The government borrowings from the banking sources increased by 13.94 per cent in 2006-07 compared to that of 23.57 per cent at the end of 2005-06.
On the other hand, borrowings from the non-banking sources increased 10.58 per cent in 2006-07. But the growth was 8.13 per cent at the end of 2005-06 fiscal.
The visiting IMF team led by its Asia Pacific adviser Thomas Rambough is scheduled to end its fortnight long Poverty Reduction Growth Facility (PRGF) exploratory mission tomorrow (Monday).
The main concern of the recent IMF mission has been the revenue sector reform.
It made two recommendations -- joint audit of income tax and value added tax (VAT) departments and changes in the VAT law -- to help spur revenue growth, source said.
But NBR officials turned down both the proposals.
Other major target of the latest IMF mission is to negotiate on a possible PRGF-successor with the authorities concerned. Substantial progress has already been made in this connection, sources added.