The government鈥檚 net borrowing from the banking system soared by Tk聽45,557 crore in the past three months, marking a significant shift from the negative borrowing seen in the July-January period of the current financial year 2023-24.
The shift was concerning considering the persistent inflationary pressures in the country, experts said.
According to Bangladesh Bank data, the net government borrowing reached the current level of increase in July-April 22 of FY24, increasing from Tk聽120 crore negative in July-January.
In the current financial year 2023-24, the government borrowed a massive Tk聽65,431 crore from the country鈥簊 commercial banks in the first 10 months (July 1-April 22), as per the Bangladesh Bank data.
Despite this substantial borrowing, the government managed to repay the Bangladesh Bank Tk聽19,874 crore in the same period.
In contrast, the government had repaid the central bank Tk聽29,498 crore in the July-January period, which has now declined to the current level.
The government has set a borrowing target of Tk聽1.32 lakh crore from the banking system for FY24.
However, due to inflation and economic crises, it stays far away from this target.
Bangladesh Bureau of Statistics recorded headline inflation of 9.81 per cent in March compared with that of 9.67 per cent in the previous month.
In the past financial year 2022-23, the government鈥檚 borrowing from the country鈥檚 banking sector amounted to Tk聽1.24 lakh crore, with Tk聽98,826 crore borrowed from the central bank and Tk聽25,296 crore from the commercial banks.
High borrowing from commercial banks may worsen the current liquidity crisis in the financial market, experts said.
The government鈥檚 outstanding borrowing from the banking sector has reached Tk 4 lakh crore, due mainly to sluggish revenue collection.
The Bangladesh Bank data shows that the government鈥檚 outstanding borrowing from the country鈥檚 banks, including the BB, reached Tk聽4,39,335 crore as of April 22, 2024, up from Tk聽3,93,774 crore on June 30, 2023.
The government鈥檚 outstanding loans from commercial banks crossed Tk聽3 lakh crore on April 22 compared with those of Tk聽2,39,615 crore on June 30, 2023, according to the BB data.
Bankers said that the government relied on borrowing from the banking sector due to increased expenditures against poor revenue collection and a decline in foreign direct investments.
To finance significant budget deficits, the government has had to turn to domestic sources.
But to mitigate burden of high-interest rates, the government has avoided borrowing through national savings certificates.
Recognising that further borrowing from the Bangladesh Bank could fuel inflationary pressures, the government exercised prudence following its substantial borrowing, bankers said.
The government primarily relies on advances, overdrafts, and the issuance of treasury bills and bonds from the banking system to manage its borrowing needs.
The heavy reliance on borrowing from the banking system may signal challenges in revenue generation and limited access to alternative financing avenues, according to bankers.
The government鈥檚 borrowing from non-banking domestic sources includes government T-bills and bonds owned by non-bank financial institutions, insurance firms, and private investors, as well as savings vehicles developed by the Directorate of National Savings.