The governments net borrowing from the banking sector soared by Tk 45,557 crore in the past three months, for a target of 1.32 crore for FY 24 marking a significant shift from the negative borrowing seen in July-January period of the current financial year 2023-24.
According to Bangladesh Bank (BB) data, the net government borrowing reached the current level of increase in July-April 22 of FY24, increasing from Tk 120 crore negative in July-January.
In the current financial year 2023-24, the government borrowed a massive Tk 65,431 crore from the commercial banks in the first 10 months (July 1-April 22), as per the Bangladesh Bank data.
Despite this substantial borrowing, the government managed to repay Bangladesh Bank Tk 19,874 crore in the same period. In contrast, it repaid the central bank Tk 29,498 crore in July-January period, which has now declined to the current level.
The government has set a borrowing target of Tk 1.32 lakh crore from the banking system for FY24. However, due to inflation and economic crises, it stays far away from this target.
In the past financial year 2022-23, the governments borrowing from the countrys banking sector amounted to Tk 1.24 lakh crore, with Tk 98,826 crore borrowed from the central bank and Tk 25,296 crore from the commercial banks.
The governments outstanding borrowing from the banking sector has reached Tk 4 lakh crore, due mainly to sluggish revenue collection.
Bangladesh Bank data shows the governments outstanding borrowing from the countrys banks, including the BB, reached Tk 4,39,335 crore as of April 22, 2024, up from Tk 3,93,774 crore on June 30, 2023.
The governments outstanding loans from commercial banks crossed Tk 3 lakh crore on April 22 compared with those of Tk 2,39,615 crore on June 30, 2023, according to the BB data.
Bankers said the government relied on borrowing from the banking sector due to increased expenditures against poor revenue collection and a decline in foreign direct investments.
To finance significant budget deficits, the government has had to turn to domestic sources. But to mitigate burden of high-interest rates, the government has avoided borrowing through national savings certificates (NSC).
Recognising that further borrowing from Bangladesh Bank could fuel inflationary pressures, the government exercised prudence following its substantial borrowing, bankers said.
The government primarily relies on advances, overdrafts, and the issuance of treasury bills and bonds from the banking system to manage its borrowing needs.
The heavy reliance on borrowing from the banking system may signal challenges in revenue generation and limited access to alternative financing avenues, according to bankers.
The governments borrowing from non-banking domestic sources includes government T-bills and bonds owned by non-bank financial institutions (NBFI), insurance firms, and private investors, as well as savings vehicles developed by the Directorate of National Savings.
