Borrowing thru' savings tools up by 100pc

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S M Jahangir
The government's net borrowing from the savings instruments marked a sharp rise in the past few months, enhancing its liability on account of servicing the internal debt.
Official figures showed that the government's net borrowing through savings certificates shot up by 100 per cent to reach Tk 9.51 billion during the July-October period of the current fiscal over the matching period of last fiscal.
The government borrowed Tk 4.75 billion through the savings instruments until October of the fiscal year (FY) 2007-08, an official said, quoting the official figures.
Official sources said such an increased volume of borrowing from the savings tools also pushed the government's overall payment of interest significantly up on account of servicing the public debt.
Citing figures, they said the volume of interest paid by the government for servicing its internal debt increased to Tk 21.80 billion during the July-October period of the current fiscal from Tk 18.50 billion in the corresponding period of FY 2007-08.
They, however, attributed such a sharp increase in the internal borrowing to the relaxation of the tax provision and other conditions for the investors.
The investors started pumping increased volume of fund into the savings instruments following an enhancement of the tax exemption ceiling on income on account of interest gain from investment in savings tools, said an official.
The NBR had raised the minimum tax exemption ceiling of interest earnings from the savings certificates to Tk 150,000 from late October last year following appear made by various quarters including the investors.
Earlier, the NBR imposed a 10 per cent tax at source from July 1, 2007 on minimum Tk 25000 worth of interest to be gained from investment in the government's existing savings certificates and other investment bonds.
The imposition of such tax had not only halted the investment growth in the state-run savings tools, but it also resulted in large withdrawal of fund from the systems, said an official.
Apart from that, the government also relaxed a provision, under which the investors do not require to make any declaration about their previous investment while buying the savings instruments, has also lured more individuals to invest in the saving instruments, he observed.
"Both the revised provisions helped reverse the previous falling trend in the sales of savings instruments," the official said, adding that the withdrawal of investment from the system by the inventors also declined significantly.
According to figures, the overall sales of savings certificates reached Tk 46.81 billion until October of the FY 2008-09 while the amount was Tk 45.33 billion in the same period of last fiscal.
On the other hand, investment worth Tk 37.30 billion was withdrawn from the system during the July-October of the current fiscal compared to Tk 40.58 billion in the matching period of last fiscal.
The officials predicted a further rise in the investment under the official savings instruments in the months ahead.