The net government borrowing from the country’s banking sector surged in the July–March period of the 2024–25 financial year compared with that in the same period a year earlier, as it ramped up borrowing to address budget deficit ahead of the financial year’s end.
According to Bangladesh Bank data, the net government borrowing from the banking sector stood at Tk 51,981 crore in the nine months, up sharply from Tk 29,939 crore in the same period a year earlier.
The amount represents 52.5 per cent of the government’s revised annual target of Tk 99,000 crore in bank borrowing for the financial year.
Officials at the central bank said that with the Bangladesh Bank discontinuing its previous practice of devolving treasury instruments, the government had increasingly relied on scheduled banks for financing.
In the period, the government borrowed Tk 93,371 crore from the commercial banks, significantly higher than the Tk 59,842 crore borrowed in the same period of FY24.
In the same period, the government repaid Tk 41,388 crore to the Bangladesh Bank, reducing direct central bank financing. The repayment to the BB in the same period of FY24 was Tk 29,903 crore.
The jump in borrowing was particularly steep in March, with net borrowing rising from Tk 26,225 crore in July–February to over Tk 51,000 crore in March, indicating heavy reliance on borrowing before the end of the financial year in June as budgetary pressures mounted.
Economists said that the rise in bank borrowing underscored the government’s struggle for meeting spending needs amid weak revenue collection.
With tax receipts lagging behind projections, the banking sector has become the primary source of deficit financing, they said.
Bankers attributed the government’s increased borrowing to high yields on treasury instruments.
Yields on T-bills have reached 11.86 per cent, while bonds are nearing 13 per cent, making them attractive investment options for banks, especially in an environment of economic uncertainty and sluggish private sector demand, they said.
The Bangladesh Bank’s approach towards curbing inflation by avoiding printing money has also contributed to the government’s growing dependence on the commercial banks.
To address systemic weaknesses, the central bank has recently restructured the boards of 14 troubled banks, several of which had faced restrictions on lending due to financial irregularities.
With limited opportunities for safe and profitable investments, banks have turned to government securities.
Excess liquidity in the banking system reached Tk 2.34 lakh crore in January, up from the June 2024 level, as banks accumulated idle funds.
The private sector credit growth dropped to 6.8 per cent in February, the lowest in two decades, reflecting declining investor confidence and risk aversion.
Inflation has remained high — above 9 per cent since March 2023 — recording 9.35 per cent in March.