Bank borrowing surges on rising expenditure

The government’s borrowing from the banking system rose sharply in the first five months of the current fiscal year due to increasing expenditure and low debt through the sales of savings certificates.

It borrowed Tk 18,753.44 crore from banks between July and November, up from Tk 3,124.9 crore in the same period of the last fiscal year, as per the latest data from the Bangladesh Bank.

Besides, from December 2 to 5, the government borrowed Tk 15,608 crore through issuing 91-day and 364-day treasury bills to partly meet its budget deficit.

A high official of the Bangladesh Bank’s Debt Management Department said the government’s bank borrowing had risen sharply in recent times owing to rising expenditure and lower trends of debt through the sales of savings certificates.

The net sales of national saving certificates fell by 26.27 per cent to Tk 8,558.14 crore in the July-September period of the current fiscal year, as per the central bank data.

The Bangladesh Bank official also said the borrowing amount was not that high considering the target as the government had fixed a Tk 76,452 crore borrowing target from the banking system to meet its budget deficit for FY22.

From July to November of this fiscal year, the government borrowed Tk 19,457.81 crore from the scheduled banks and repaid Tk 704.37crore to the Bangladesh Bank.

“The government’s increasing trend of bank borrowing has not been a problem so far. But now this is a problem as this trend tightens liquidity in the banking sector,” said Ahsan H Mansur, executive director of the Policy Research Institute.

But there was no other option for the government to meet budget deficit as there was a shortfall in revenue income, which was the reason behind the surge in bank borrowing, he added.

From July to November, there was a Tk 13,099 crore shortfall in revenue collection. The target was Tk 1,13,366 crore.

The current bank borrowing situation would continue for some days, said Ahsan, also the chairman of Brac Bank.

The economist further said the government’s expenditure had increased as fertiliser prices had gone up and food subsidies had also increased due to price hikes in the global market.

The government borrowed Tk 1,269.99 crore from the non-banking source by issuing treasury bills and bonds between July and November.

In these five months, the government borrowed Tk 20,023.43 crore from domestic sources, excluding net sales of national savings certificates.

Three treasury bills are now transacted through auctions to adjust the government’s borrowing from the banking system. The bills have 91-day, 182-day, and 364-day maturity periods.

Furthermore, five government bonds with tenures of two, five, 10, 15, and 20 years are traded in the money market.