Govt bank borrowing up

The government’s borrowing from the banking system has shot up in recent months due to mainly the low debt through sales of savings tools and rising expenditure.

It borrowed Tk 31,038 crore from banks between July and November, up from Tk 17,828 crore in the same period of the last fiscal year, as per the latest data from the Bangladesh Bank. The government’s expenditure has increased during the yearend period, which has forced the government to borrow more from the banks, said a high official of the Bangladesh Bank’s Debt Management Department.

He said that the declining trend of saving certificate sales was another reason for growing government bank borrowing.

During July-October of this fiscal year, government borrowing from the savings tools stood negative at Tk 632 crore, which was positive at

Tk 9,324 crore during the same period of last fiscal year.

Industry insiders said that the government reduced the borrowing from saving tools because the International Monetary Fund (IMF) recommended reducing the high interest-bearing saving certificates.

During the five months of this fiscal year, the government borrowed Tk 43,306 crore from the Bangladesh Bank, and during the same period, it repaid Tk 12,268 crore to the scheduled banks.

As a result, the government’s net borrowing stood at Tk 31,038 crore.

The government’s borrowing from the Bangladesh Bank means injecting printed money into the market, which will help to fuel inflation, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

He said that there is no other option for the government to meet the budget deficit as there was a shortfall in revenue income, which was the reason behind the surge in bank borrowing.

Bangladesh’s National Board of Revenue (NBR) has collected Tk 90,901.99 crore in the July-October period of the current fiscal year (2022-23), against the target of Tk 97,306.86 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 and food subsidies had also increased due to price hikes in the global market.

The government borrowed Tk 4146.70 crore from the non-banking source by issuing treasury bills and bonds between July and November.

In these five months, the government borrowed Tk 35,184.90 crore from domestic sources, excluding net sales of national savings certificates.

The government has set a Tk 106,334 crore borrowing target from the banking system to meet the budget deficit.

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.