Govt's public borrowing hits zenith in July-March

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FE Report
The government's borrowing from savings instruments hit a record high in the first three quarters of the current fiscal as investors continued to pump funds into the state-run investment tools.
Official figures showed the government borrowed a net amount of over Tk 85.29 billion in the July-March period of the 2009-10 fiscal, which was nearly four times higher than that of the matching period in the last fiscal.
"The government's borrowing in the first nine months of the current fiscal was nearly 300 per cent up from that of the corresponding period in the previous fiscal," a senior official said quoting the official figures.
During the July-March period of the 2008-09 fiscal, the official borrowing from savings instruments was Tk 21.43 billion, the official mentioned.
Officials attributed such a phenomenal growth in the public borrowing to a continuous increase in the investors under the state-run savings tools, caused due to a comparatively higher return.
The previous government decision to enhance both the ceiling of tax at source on interest gains and investment limit also encouraged people to invest more in the savings tools, they said.
"Both the individual and institutional investors continued to pour funds into the government's investment tools following the cut in the deposit rates by commercial banks," said an official.
Following a Bangladesh Bank (BB) intervention, banks operating in the country had recently reduced both deposit and lending rates.
Against the backdrop, many investors are preferring investing in the state-run savings certificates and bonds.
Officials, however, indicated that the government's net borrowing from the internal source might surpass the Tk 100 billion mark by the end of this fiscal given the fact that the current investment trend persisted.
According to figures, investment under the official savings certificates and bonds crossed Tk 189 billion mark until March in the 2009-10 fiscal compared to Tk 110.57 billion in the same period last fiscal.
Apart from the increase in the investments, the extent of fund encashed by the savers was also low, official sources said.
As a result, the volume of interest paid by the government against servicing its debt during the last July-March period of this fiscal did to match the investment growth over the corresponding period in the last fiscal, they mentioned.
The government paid about Tk 51.35 billion as interest until December of the FY 2009-'10 on account of servicing its public debt while the amount was nearly Tk 52.20 billion in the same period of the last fiscal.