After three consecutive fiscal years of decline, government borrowing from Savings Certificates has surged, raising concerns about inflationary pressures, central bank officials say.
In the first six months of the 2025-26 fiscal year, the government borrowed Tk 2,461 crore from Savings Certificates, pushing the total to Tk 3,41,253 crore by the end of December. By contrast, borrowing from these instruments had fallen by Tk 6,063 crore in the previous fiscal year.
Meanwhile, the annual inflation rate has fluctuated between 8.17% and 8.49% as of late 2025, after reaching higher peaks earlier in the year. Food prices remain the primary driver of inflation, although general inflation has eased slightly from three-year highs.
Economists warn that borrowing through Savings Certificates can contribute to inflationary pressure if it expands the money supply, particularly when funds are used for consumption rather than productive investment. The International Monetary Fund (IMF) has repeatedly advised Bangladesh to reduce reliance on such high-cost domestic borrowing and implement reforms to curb inflation and strengthen the financial system.
Higher government borrowing from banks and public funds is also crowding out credit for the private sector, which fell to 6.10% in December-the lowest level in over two decades. Economic activity has been constrained by high inflation, widespread money laundering, and political uncertainty, with private sector demand for credit hitting record lows.
A central bank official noted that the government has focused on tackling money laundering and controlling inflation since taking office. Inflation stood at 8.49% in December
The government has set a target of borrowing Tk 1,04,000 crore from banks in the current fiscal year, compared with just Tk 1,000 crore in the previous year. By 4 January, borrowings from the banking system had already reached Tk 59,756 crore, reflecting the high cost of government expenditures.
High interest rates in banks, volatility in the capital market, and relatively low returns elsewhere have led many, particularly older and retired officials, to invest their savings in government Savings Certificates.
Following a sharp cut in bank deposit rates, the government has reduced the interest rates on Savings Certificates several times, while yields on treasury bills and government bonds have risen significantly. This has prompted some investors to diversify their savings into government bonds and other portfolios.
