Saturday, April 27, 2024
The rising trend of government borrowing from the banking sector will put pressure on the private sector, said Salehuddin Ahmed, former governor of Bangladesh Bank, on Saturday.
"The government bank borrowing has been increasing in recent times as revenue collection was not enough to meet the deficit in the budget," he said while addressing a webinar on “Budget and Bank Borrowing”.
BIBM certified Bankers Alumni Association (BCBAA) organised the webinar where economic affairs analyst and BCBAA Member Secretary Md Mazadul Hoque moderated the event.
The government plans to secure Tk 1,41,818 crore in loans from different domestic sources to tackle the deficit in the upcoming national budget for FY23.
Out of the total target, Tk 1,01,818 crore will come from the banking sector and the rest Tk 40,000 crore from other sources, including savings certificates, as per the Ministry of Finance officials.
The former central bank chief said that banks also feel comfort in this regard as it is a risk free lending.
"The country’s GDP (gross domestic product) to government bank borrowing is lower than many developed countries," he said, adding that if the government bank borrowing increases, monetary policy of the central bank weakens and becomes ineffective.
Salehuddin said that the government has to be careful in case of taking foreign loans so that the country does not face any disaster similar to Sri Lanka.
“The volume of foreign loans also has increased, though we have not become a defaulter yet.”
Stressing the importance of utilising foreign loans properly, he also added, “We take more time to implement mega projects than the scheduled projection, which is a problem for proper utilising both domestic and foreign loans.”
The former governor suggested the government take foreign loans under easy terms and conditions.
BIBM Director General Md Akhtaruzzaman, Centre for Policy Dialogue (CPD) Distinguished Fellow Mustafizur Rahman, Policy Research Institute (PRI) Executive Director Ahsan H Mansur, Bangladesh Competition Commission Adviser MS Siddiqui, among others, attended the webinar.
