Government Reducing Dependence on Savings Certificates, Plans to Further Cut Interest Rates

 Staff Reporter | PNN:

The government’s dependence on high-interest savings certificates is gradually decreasing. Although for many years the government relied on the sale of savings certificates to cover budget deficits and fund development projects, Bangladesh Bank is now planning to further reduce their interest rates.

From June to December of this year, the maximum interest rate on savings certificates has been set at 11.98%, and the minimum at 9.72%. Bangladesh Bank spokesperson Arif Hossain Khan stated that the government has taken this step to encourage citizens to invest in treasury bonds and other financial instruments instead.

State-owned banks have also expressed that, since inflation has fallen to single digits, it is now necessary to lower interest rates. Agrani Bank PLC Chairman Syed Abu Naser Bakhtiar Ahmed said that maintaining high interest rates on savings certificates would make it difficult for the government to repay its debts.

Economists believe that it is essential to create safe alternative investment options for the large population that has long depended on savings certificates. Former BIBM Director General Dr. Tawfiq Ahmed Chowdhury commented, “Relying solely on savings certificates is no longer practical. Investors need to look toward alternative sources.”

In the last fiscal year, the net sale of savings certificates was negative—by about Tk 6,063 crore. This means the government spent more money repaying previous savings certificate principals and interest than it raised through new sales.