Interest rates on savings instruments may fall
Finance Minister AMA Muhith has hinted that the government may cut interest rates on savings instruments in the next fiscal year.
Muhith sat with economists at a pre-budget meeting at the National Economic Council auditorium yesterday.
Economist Ahsan H Mansur said borrowing from the savings instruments have crossed the government target.
The rate of interest on the instruments should be market-based and the finance ministry should have acted in time; otherwise financial intermediation will be affected, Mansur added.
Muhith agreed and said, "It is much too high compared to the yield on deposit rates."
The rate will be reviewed for the next fiscal year, he added. Between July and February, the sales of savings instruments soared 77.41 percent year-on-year to Tk 26,533 crore, according to statistics from National Savings Directorate.
The development is a massive setback for the government, which aimed to keep net borrowing through savings instruments within Tk 9,056 crore this fiscal year.
The rate of interest on savings instrument is between 12 percent and 14 percent.
In the last two and a half years, the rate of interest on bank deposits has been on a slide.
In January, the weighted average interest rate on deposits was 7.26 percent, down from 8.34 percent a year ago.
The government's expenditure on interest payment for savings instrument increased 23.68 percent to Tk 6,108 crore in the first eight months of the fiscal year, according to data from the Savings Directorate.
Another economist at the meeting said some government organisations, instead of depositing their revenue with the government exchequer, keep the funds in the organisation's own accounts. Reacting sharply to it, Muhith said many government bodies illegally keep money in their own accounts, which will be stopped.
Those who keep money this way will face fines and jail terms, he added. "This is so wrong. Some of us (government officials) become chairmen (of those organisations), open separate accounts and deposit money." It is absolutely against financial discipline, said Muhith. "I think we should make some laws to punish these people individually."
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