Regulate Investment On Treasury,NSC

Regulate investment on treasury bond and NSC To bring the much needed vibrancy.

The IMF has shelved its decision to give fourth instalment of the ongoing credit package till March this year. The step is taken as the NBR did not manage to bring enough revenue for the state coffer. Earlier the IMF had lowered the revenue target to Tk 4.55 trillion from Tk 4.78 trillion.The NBR has to fetch enough revenue by March to convince the IMF that it will get closer to the target of Tk 4.55 trillion by the end of this year.

Another good news came from China: the country extended duration of paying back all loans to 30 years from 20 years. This will certainly give Bangladesh some comfort in dealing with external debt. Our external debt servicing already reached more than $3 billion every year.

Not only the external debt, internal debt servicing is also causing strain on the govt. Individual and business alike heavily rely on National Savings Certificate (NSC) and govt treasury bond,as the two offer high rate of interest, when business prospect is bleak and law & order situation shows no sign of improvement.

Even the small business and big business group that take loan from banks may feel encouraged to invest in NSC or treasury bond as the investment is secured. In this backdrop, private sector credit may not bring the expected vibrancy to the economy. It is because productive use of credit is not ensured here.

In addition, many private banks and non-bank financial institution may prefer to invest more in govt treasury rather than channeling the fund to the private sector, shrinking further the private sector credit. Bangladesh Bank requires to wield its regulatory power here. Earlier govt made it mandatory to submit TIN certificate to invest more than Tk 500000 in NSC. The central bank may fix the ceiling on how much money a bank can invest on treasury bond. It can also freeze money if it originates from private bank loan given to some other purposes. The step to some extent will bring discipline into private sector credit.

Energy dues reached Tk 670 billion. Enough revenue generation and cutting spending could give early sigh of relief. While exchange rate is left for the market to decide, is it necessary to pay Tk 70 billion as remittances incentive every year? We should rationalize it. At the same time, govt's reliance on NSC should be curtailed. Interest payment every year raises govt's spending. The money instead should go to the private sector,particularly the SMEs, which will take good care of them.