Sales of savings tools fall 309pc in Jul-Apr of FY24

SAJIBUR RAHMAN | Published: July 01, 2024 23:06:54

Net sales of government savings instruments saw a dramatic year-on-year decline of more than 309 per cent in the first ten months (July-April) of FY2023-24 compared to the same period of the previous year, thanks to higher encashment rates outpacing new investments.
The Bangladesh Bank data shows negative growth in savings instruments of Tk 146.48 billion for July-April of FY24. In contrast, sales of savings certificates during the same period in FY23 exceeded Tk 35.79 billion.
The negative growth for savings certificates was already over Tk 125.45 billion in the first nine months of FY24.
However, April 2024 saw a further decline in net sales compared to April 2023, suggesting a decreasing public confidence in these government borrowing tools.
The central bank data shows negative growth of Tk 21.03 billion in April 2024, compared to positive growth of Tk 5.81 billion in April 2023.
In simpler terms, this means that encashment rates were exceeding the volume of new sales during this period.
Several factors, including rising inflation, financial strain, reduced bank profitability and challenging investment conditions, contributed to the downward trend.
The net sales figure for savings tools is calculated by subtracting the amount repaid for previously sold certificates from the total sales figure.
Bangladesh Bank data shows the total outstanding amount of savings instruments has seen some minor fluctuations.
It exceeded Tk 3.52 trillion from July to April in FY24, compared to over Tk 3.60 trillion during the same period in FY23.
It crossed Tk 3.54 trillion from July to March in FY24, compared to over Tk 3.59 trillion during the same period in FY23.
Similarly, the overall outstanding amount for July to February in FY24 crossed Tk 3.58 trillion, down from more than Tk 3.60 trillion in the corresponding period of FY23.
In April 2024, the outstanding amount was more than Tk 3.52 trillion, compared to Tk 3.54 trillion in March.More than Tk 3.58 trillion outstanding amount stood at February 2024.
January 2024 saw the highest outstanding amount at over Tk 3.60 trillion, according to the central bank.
There are currently 11 government-backed savings instruments available, including four savings certificates.
These offer attractive yields, with the highest being the 'Pensioner Sanchayapatra' at 11.76 per cent. These are the maximum yields after the certificates mature.
The government has set a net borrowing target of Tk 180 billion from savings schemes for the current financial year.
In 2019, the government launched an online system, the National Saving Certificates Online Management System, to manage these savings instruments. Electronic Tax Identification Numbers (eTINs) and national identity cards became mandatory for savers.
Professor Dr Mustafizur Rahman, a senior member at the Centre for Policy Dialogue (CPD), said the government is exploring alternative borrowing methods, such as loans from foreign countries and the private sector. He observes a shift towards short-term investment options as people find them easier to manage.
Dr Rahman attributed the decline in savings to current economic conditions, including high inflation and economic uncertainty, which make people less interested in saving.
Dr Rahman highlighted that due to high inflation and economic uncertainty, people are less motivated to save money, and instead, they are turning to other types of investments and borrowing options.
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