Govt borrows nothing, repays bank loans
For the first time, the government in last fiscal year did not borrow from banks rather it repaid previous loans, thanks to a huge sale of savings instrument.
In FY 2009-10 the government repaid Tk 3,980 crore bank loans.
It however borrowed Tk 10,965 crore in the previous fiscal year.
While in the revised budget of the last fiscal year the target for borrowing from banks was Tk 8,661 crore.
A finance ministry official said, a huge increase in the sale of savings instrument, revenue earning crossing target, and less ADP expenditure contributed to the fall in bank borrowing.
According to Savings Directorate statistics, in the last fiscal year net sale of savings instrument increased by 219 percent compared to the previous year. Net sale of savings instrument in last fiscal year was Tk 11,590 crore which was Tk 3,633 crore in FY 2008-09.
The government target of taking loans from the savings instrument was Tk 8,407 crore whereas it got additional Tk 3,183 crore. Revenue earning was also Tk 1,000 crore higher than the target.
A top-ranking Bangladesh Bank official said, this is not complacency for the government as the cost on interest payment will increase in future due to a rise in the borrowing from the savings instrument.
The BB official said in the last fiscal year the average rates of interest were 7.85 percent on the five-yearly bond and 12 percent on five-yearly savings instruments. So, the expenditure for paying the interests on loans taken through the savings instruments will be much higher.
The central bank official said, as the commercial banks cut the interest rate on deposits some of the small savers moved to share market and some others invested in savings instrument. As a result the sale of savings instrument was record high in the last fiscal year.
The gross sales of savings instrument in the last fiscal year was about Tk 26,000 crore which was about Tk 14,000 in the previous year.
As a result from the current fiscal year the government has lowered the interest rate on all types of savings instrument by 1 to 1.5 percent. On the other hand, it has imposed 10 percent tax on the profit of the savings instrument to discourage its sale.
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