• Tuesday, Aug 16, 2022
  • Last Update : 04:24 pm

Interest burden to rise in upcoming FY

  • Published at 07:05 pm May 29th, 2021
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The country’s budget deficit may stand at Tk2.13 lakh crore for the next fiscal year, which is 6.1% of the GDP

The government's interest burden is set to rise in the upcoming fiscal year to keep pace with the country’s budget deficit, which too may increase in the fiscal year 2021-22.

In the proposed budget for next fiscal year, the government has set aside Tk67,679 crore for debt servicing purposes, up 6.04% from that in the ongoing fiscal year, said officials of the Finance Ministry.

The country’s budget deficit may stand at Tk2.13 lakh crore for the next fiscal year, which is 6.1% of the GDP.

Of the total budget deficit, the government may borrow Tk1.23 lakh crore from domestic sources -- national savings certificates and local banks -- said Finance Ministry officials.

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Generally, the government borrows from external and internal sources to meet the budget deficit and it has to pay interest against these loans.

With the amount of interest payment, it is possible to cover two-fifths of the total annual development program, said experts.

The government has to pay much more interest for domestic loans than foreign loans, they added.

National saving certificates and local banks are the major domestic source for government borrowing.

The government has set a target of borrowing Tk20,000 crore against savings certificates for FY2020-21, but it borrowed Tk33,202.65 crore in just nine months of the ongoing fiscal year -- 66.01% higher than the fiscal target.

The government is offering about 11.3% interest on an average on the savings tools, whereas most of the banks are collecting deposits at 3-4% interest.

Savers are diverting their money to the savings certificates due to the lower yield on bank deposits, said Agrani Bank Chairman Zaid Bakht.

“People always consider savings certificates as a safe investment,” he added.

The increasing trend of borrowing through the national savings tools will raise the interest burden of the government, said experts.

To meet the budget deficit for the ongoing fiscal year, the government had set to borrow at Tk84,980 crore from the banking system but it repaid Tk13,627 crore instead of borrowing till April.