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The government is considering lifting the existing embargo on institutional investments into state-run saving schemes to boost its internal borrowing and offset its current resource crunch, sources said.
"Against backdrop of its current resource constraints caused by poor revenue collections, the government is planning to withdraw the restriction to mobilise more resources," said an official.
The move has been initiated following a drastic fall in the government's net borrowing through sales of savings certificates over the months due to the embargo, official sources said.
Official figures showed that the government's net borrowing reached only Tk 8.85 billion during first half of the current fiscal, reflecting a 67 per cent fall in comparison with a Tk 26.96 billion borrowing in the same period of last fiscal.
Officials said, such embargo is not only restricting a huge amount of fresh investments into the savings schemes, but also forcing institutions to withdraw their investments from the system on maturity.
Officials, however, feared that if the present withdrawal trend persisted the government's net borrowing from the system would decline by around 50 per cent in the 2004-05 fiscal over the last financial year.
Terming institutional investors as the largest users of the government's savings instruments, officials said investment amounting to over Tk 10 billion comes annually from them in this system.
Considering the situation, the Ministry of Finance recently directed the National Savings Department to make an assessment how much institutional fund to be withdrawn in the next six months.
The government will take necessary decision about the withdrawal of such embargo on the basis of the assessment report, they said.
To raise its borrowing from the system, the government recently withdrew a the maximum reinvestment ceilings under its various savings instruments.
The maximum investment ceiling was fixed earlier at Tk 2.5 million for individual investors while the amount was Tk 5.0 million for joint investment under all the said instruments, according to sources.
With the withdrawal, both categories of investors are now able to reinvest the mentioned amounts along with their receivable interest from earlier investments under the savings instruments, it added.
Apart from the current move to boost its borrowing from savings instruments, the poor revenue collection also forced the government to borrowing a huge amount of money from the country's banking system to meet the state expenses, according to sources.
Official figures suggested that the government's overall revenue collection fell short of target by around Tk 40 billion during the first eight months of the 2004-05 fiscal, keeping its current expenditures process at a challenging situation.
Apart from its current expenditures, the government will also require a huge amount of additional fund to implement the Sixth National Pay Scale, which is now under active consideration of the highest authorities.
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