A special savings scheme designed for retired government and private officials is also underway.

Under the proposed rate calculation, the savings instruments may lose 1-1.5 percentage points on interest. If the last six months' rate of treasury bills had been calculated, a person buying savings instruments today would have got above 11 percent against the current minimum of 12 percent.

These are all part of the government's move to peg the interest rate of savings instruments to the market as directed by the International Monetary Fund (IMF). It would also help reduce banks' lending rates, as the financial institutions would then be able to offer lower deposit rates.

The government borrows by selling the savings instruments and uses the funds to foot the bills of development projects. But because of high interest rates, the government's loan repayment liability also remains high. Despite this, the government has been using this channel to borrow funds because such an operation has no inflationary pressure.

At the end of June this year, the outstanding amount of savings instruments stood at Tk 29,582 crore, up from Tk 25,276 crore a year ago. Sales of savings certificates increased 12 percent in the first two months of this fiscal year, compared to the same period of last fiscal year.

Ten percent of this fiscal year's revenue budget has been earmarked for debt service repayment on savings instruments.

The Bangladesh Bank is also planning to formulate a guideline on purchase of savings instruments. The guideline aimed at curbing money laundering and will require a buyer to disclose their tax identification number and source of funds.