Govt bank borrowing rises sharply

The government has rushed to borrow funds from the banking sources in fag end of the current fiscal year due to the payment for implementing development projects and drastic fall in revenue collection.

It borrowed over Tk 41,444 crore from the banking sector from July to June 14 of this fiscal year, up by 58.92 percent from the previous entire fiscal year when the figure was Tk 26,078 crore, according to the latest data from Bangladesh Bank.

The government had borrowed Tk 26,741crore from July to May 26. In just 18 days, it borrowed Tk 14,703 crore.

The government bank borrowing generally increases in the months of May and June every year due to the government’s payment for implementing the Annual Development Programme (ADP), said a high official at the Debt Management Department of the central bank.

“It is true that the government bank borrowing has increased. Yet, the figure remains far below from the fiscal target,” he said.

The government has targeted borrowing Tk 76,452 crore through treasury bills and auctioning bonds from the banking system in the entire fiscal year to finance deficits.

“In the revised budget, the government hinted that the government bank borrowing will increase in the fiscal year,” said PRI Executive Director Ahsan H Mansur.

The borrowing target from the banking system was reset at Tk 87,287 crore for the fiscal year in the revised budget.

So the government needs to borrow more Tk 20,000 crore to Tk 30,000 crore in the fiscal year for internal
and external payments because the revenue collection is not up to the mark, said the economist.

Tax collection by the National Board of Revenue fell 12.45 per cent or Tk 32,390 crore short of the target set for the July-April period of the current fiscal year, according to the NBR’s provisional data.

During the period, the NBR managed to collect over Tk 2,27,641 crore against the target of Tk 2,60,031.77 crore set for the period.

Now the yield of a 10-year bond is from 8 percent to 8.25 percent due to the high demand, which indicated that the excessive government borrowing could result in crowding out of the private investment, said the PRI executive director.

For the new fiscal year starting from next month, the government has targeted to borrow Tk 1,06,334 crore from the banking sources to finance the budget deficit.

The target is 21.82 percent higher than the revised target for the outgoing fiscal 2021-22.