The finance ministry and the International Monetary Fund, which are increasingly worried over the skyrocketing growth of non-bank borrowing of the government through savings instruments, are prompting policymakers to look for quick fix to keep budgetary deficit in control.
\nThe IMF past week asked the government to rein in the abnormal rise in the non-bank borrowing after the first quarter of the current fiscal year it registered above 225 per cent growth year-over-year, a senior finance ministry official said.
\nThe cash and debt management committee of the government, headed by finance division secretary Mahbub Ahmed, will hold a meeting next week to analyse the latest investment tools situation and find appropriate remedies, the official added.
\nHe said the IMF had asked the ministry to keep the budget deficit by 3.8 per cent (excluding grants) in the current 2014-2-015 fiscal year, in contrary to the government\u2019s projected 5 per cent.
\n\u2018It\u2019s a delicate situation given the astronomical growth in the sales of savings certificates, drastic fall of bank interest rates and shielding the interests of small savers,\u2019 a high official at the ministry told New Age on Saturday.
\n\u2018We will sit next week to analyse the situation and strike a balance between the concerns of the IMF and reality of the economy\u2014investment, borrowing and possible impact on small savers in case the interest yields are lowered.\u2019
\nThe net investment in the national savings instruments shot up to Tk 6,820.99 crore in July-September of the FY15 from Tk 2,097.47 crore in the same period last financial year, the data of the Directorate of National Savings data showed.
\nThe target for non-bank borrowing of the government for the current fiscal year was set at Tk 9,056 crore, which might overshoot by December if the current trend of investment continues, a finance official estimated.
\nBased on the recommendation of the CDMC meeting, the finance ministry is expected to act to control the over borrowing in the savings tools, the official added.
\nThe official said only reduction in the interest yields on savings tools would make required financial difference as the highest rate for savings certificate is 13 per cent against 9 to 10 per cent in commercial banks for fixed deposits of money.
\n\u2018The small savers now opt for savings instruments to bear the expenses of their everyday living after banks dropped their interest rates significantly in recent times,\u2019 the official added.
\nHowever, the finance officials said in the short-term they might go for stopping publishing the advertisements to entice people to buy savings certificates.
\nAny reduction in the interest yield would need approval from prime minister Sheikh Hasina.
\n\u2018Quick fix is possible only if rates of interest on savings instruments are slashed, but the initiative would have impact on common people who live on monthly income generating from their investments in savings tools,\u2019 another finance ministry official told New Age.
\nHe said they might seek opinion from Bangladesh Bank as the monetary policy of the central bank has link with the borrowing trend of the government.
\nHe, however, said under any financial situation the deficit target could not be tamed as asked by the IMF.
\nMeanwhile, the figure from BB said the government borrowing from the banking sector stood at Tk 3,875.69 crore as of October 13, 2014 against the yearly target of Tk 31,281 crore as bank borrowing usually spirals at the end of a fiscal year.<\/p>\n

-With New Age<\/strong> input<\/p>\n","protected":false},"excerpt":{"rendered":"

The finance ministry and the International Monetary Fund, which are increasingly worried over the skyrocketing growth of non-bank borrowing of the government through savings instruments, are prompting policymakers to look for quick fix to keep budgetary deficit in control. The IMF past week asked the government to rein in<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_editorskit_title_hidden":false,"_editorskit_reading_time":0,"_editorskit_is_block_options_detached":false,"_editorskit_block_options_position":"{}","footnotes":""},"categories":[4],"tags":[],"yoast_head":"\n