Sales of government-offered saving schemes continue to rise as more than one of third of the the target for the ongoing fiscal have been raised in just two months.
In Bangladesh, economists say the disparity between the interest in bank deposit and savings certificate has encouraged a large number of people to invest in schemes offered by the Directorate of National Savings (DNS).
The deposit interests in banks now vary between four and six percent while the saving certificate interest rates are in double digits — over 11 percent.
An announcement by the finance minister that the rate will be revised down next year has shot up the sales even more.
The government had set a target to borrow nearly Tk 262 billion from the savings certificates in 2018-19 fiscal year to bridge the budget deficit.
Sales of savings certificates stood at Tk 90.57 billion in the first two months of the fiscal (July and August), accounting for around 35 percent of the target, according to figures by the DNS.
Bonds and saving certificates are forms of debt and the government will have to repay a certain amount of interest with the principal amount.
In July, a total of Tk 82.29 billion worth saving certificates were sold. But the government had to spend Tk 31.93 billion to repay the investors, which means the net debt for the month was Tk 50.35 billion.
The sales in August stood at Tk 67.33 billion, when the Tk 27.11 billion was repaid to investors leaving a a net debt of Tk 40.22 billion.
In August last year, the net investment in savings certificate was Tk 39.75 billion.
In the previous of 2017-18 fiscal, the government's net debt stood at Tk 465.30 billion against a target of Tk 440 billion.
In August this year, Finance Minister AMA Muhith said that the Bangladesh Bank and the Internal Resources Division were working on readjustment of the rates but that is not happening before the next general election.
The interest rates of savings certificates were cut for the last time in 2015 by an average 2 percent to rein in sales.
Muhith had been saying he would cut the rates further as the government borrowing from the savings certificates is rising along with the sales.