Mobilisation of fund thru’ savings tools declines

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S M Jahangir
The imposition of a 10 per cent tax at source on the interest income from savings tools has eroded confidence of small investors.
There has been a significant withdrawal of investments in the state-run savings certificates following the imposition of such tax, sources said.
Besides, the overall sales of the savings certificates and bonds recorded a decline because of the tax.
The government in the current budget ordered deduction 10 per cent tax at source on interest income of Tk 25,000 and above from various savings certificates.
According to official source, the imposition of tax at source has prompted many investors to encash their savings certificates.
A finance ministry official said over Tk 10 billion worth of savings certificates was encashed by investors in the month of July last alone.
The official said, "Such a large withdrawal of investment from the savings certificates was mainly because of imposition of the tax at source."
Figures showed that the government sold savings certificates and investment bonds worth of nearly Tk 13.50 billion in the month of July last.
Besides, the latest imposition of tax at source had also resulted in a negative growth of the sales of the existing savings instruments, an official said, without elaborating further.
During the same period, the government's net borrowing through sales of saving certificate significantly declined to Tk 2.53 billion.
Official sources also said the increased encashment of savings instruments by investors also pushed the government's payment against savings instruments significantly up in the said month.
The government paid a record amount of Tk 5.45 billion as interest for the month of last July for servicing its internal debt, according to the finance ministry official.
Official sources, however, indicated that the present trend in the withdrawal of investments might persist in the months ahead.
As a result, the government is unlikely to meet its borrowing target though the savings schemes in the current fiscal year.
It has set a net borrowing target at Tk 37.78 billion from sales of savings certificates for the 2007-08 fiscal.
According to official figures, the government's net borrowing from the system was recorded at nearly Tk 41.75 billion during the FY 2006-07, which was much higher than the target.
It recently revised upward its net borrowing target from Tk 26 billion to Tk 28 billion for the last fiscal, the figures showed.