Savings Certificates Crash, Revenue Collection Failure: Economic Crisis Deepens

Staff Correspondent

The government’s borrowing from savings certificates during the current administration’s tenure presents a concerning picture. Borrowing from this sector continues to decline. In the first 10 months of the current fiscal year (up to April), government borrowing from savings certificates decreased by Tk 7,431 crore. However, in April alone, there was a sudden borrowing of Tk 1,260 crore.

Economic analysts suggest that borrowing increased slightly this month due to reduced pressure on monthly interest payments.

Multiple factors are behind the decline in savings certificate investments. Prolonged high inflation has reduced people’s savings capacity. Simultaneously, liquidity crises in the banking sector have driven up deposit interest rates, leading people to shift toward treasury bills and bonds, which are tax-free and offer relatively higher interest rates (around 12%). The 5-10% tax deduction on savings certificate profits is also discouraging public interest.

Although the government borrows from domestic and foreign sources annually to meet budget deficits, expected funds from savings certificates are not materializing. While the current fiscal year’s main budget set a target of Tk 15,400 crore from savings certificates, it was later revised down to Tk 14,000 crore. In reality, not only is the target unmet, but borrowing has instead decreased.

This trend has persisted for three consecutive fiscal years. In FY2022-23, government borrowing decreased by Tk 3,296 crore. While borrowing had increased by Tk 19,916 crore in FY2021-22, the trend reversed afterward. Last fiscal year saw a massive decline—Tk 21,124 crore. As of April, the government’s outstanding borrowing from savings certificates stands at Tk 3,38,838 crore.

Meanwhile, the government is also failing to achieve desired revenue collection. Revenue earnings up to April amounted to Tk 2,89,268 crore, a mere 3.96% increase compared to the previous year. Yet expenditures—particularly for old loan interest payments and operational costs—continue to rise. As a result, the government has become increasingly dependent on bank loans, though even that remains below budget expectations.

For the next fiscal year, the budget size has been reduced to Tk 7,90,000 crore, with a deficit of Tk 2,26,000 crore. Plans include arranging Tk 1,25,000 crore from domestic sources, of which Tk 1,04,000 crore will come from banks.