The government borrowed Tk 18,805 crore from scheduled banks in the July-August period of FY24, and in the same period, it repaid Tk 22,088 crore in loans to the Bangladesh Bank.
It should be noted that in the first two months of FY23, the government – instead of borrowing from the country’s scheduled banks – had repaid Tk 1,187 crore in loans. During the same timeframe, the government had borrowed Tk 5,622 from the central bank.
There has been some criticism over the government’s heavy reliance on borrowing from the Bangladesh Bank in recent times.
Economists say the upward trend in scheduled bank borrowing by the government is having a direct impact on private sector credit growth, as evident by a significant decline of this indicator.
Bangladesh’s private sector credit growth reached a 21-month low of 9.82 per cent this July, owing to the ongoing liquidity shortage, high amount of non-performing loans, and economic woes in the country.
Speaking to The Business Post, Centre for Policy Dialogue (CPD) Distinguished Fellow Prof Mustafizur Rahman said, “When the government borrowed from the central bank, inflation soared in the country, which remains higher compared to the last two fiscal years.
“The process of government borrowing should avoid having an impact on the country’s private sector.”
According to central bank data, the government’s net credit from the banking systems was Tk 3,283 crore in the first two months of FY24, compared to Tk 4,435 crore in the same period last year.
While the outstanding position of net borrowing from the banking sector was Tk 3.90 lakh crore in August this year, compared to Tk2.78 lakh crore when compared year-on-year.
The target of government borrowing from the banking system has been set to Tk 1,32,000 crore to cover FY24 budget deficit.
A central bank official, on condition of anonymity, said, “There was a liquidity crunch in the banking sector a few months ago. This shortage has been mitigated due to the increased lending of money by the central bank to commercial banks through repurchase agreements (REPO) and liquidity facilities.
“The government has now increased borrowing from commercial banks. In addition, due to the sale of USD from the reserves, a lot of money is going to the central bank vault.”
The sale of $13.58 billion from reserves in the last fiscal year resulted in Tk 1.14 lakh crore being deposited in the central bank's vaults from the market, insiders say.
