Govt bank borrowing surges around Tk6,000cr in October
Government borrowing from the banking sector and savings tools increased by Tk5,796 crore in October, according to central bank data, as the government's domestic borrowing from the banking sector escalated to Tk18,323 crore at the end of the first four months of the current fiscal year.
Government borrowing from the banking sector stood at Tk2,88,508 crore at the end of October, according to Bangladesh Bank data. It shows government borrowing from the banking sector decreased in October compared to the previous month.
The banking sector lent around Tk15,000 crore to the government in September as the loan portfolio reached Tk282,712 crore at the end of that month.
For the current fiscal year, the government's bank borrowing target is Tk106,334 crore to meet the budget deficit. At the end of October, the government had borrowed 17.23% of the target from the banking sector.
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In the last one year, the central bank accounted for 84% of the loans taken by the government, while commercial banks provided the remaining 16%.
According to central bank data, the government borrowed Tk76,380 crore from the banking sector in the last one year from October 2021. Of it, Tk64,185 crore came from the central bank and Tk12,195 crore from the commercial banks.
Former central bank governor and economist Salehuddin Ahmed said the banking sector is already under a liquidity crunch. The government borrowing will mount the pressure further.
"The government should shelve costly projects for now. We certainly need to tighten the belt further," he told The Business Standard.
The government has set a Tk40,001 crore borrowing target from the non-banking sector in the current fiscal year. According to the central bank, borrowing from this sector till October amounted to Tk3,357 crore.
From July to September, the three months of the current fiscal year, the government's net loan from saving certificates stood at Tk330 crore, which is less than 1% of the fiscal year's target of Tk35,000 crores.
According to the central bank report, in the first three months of the current fiscal, the government has borrowed Tk21,511 crores from the savings tools and paid back Tk21,180 crores of previous loans.
Mentioning that the interest rate of savings tools should be increased, Salehuddin Ahmed said deposits through the certificates dropped substantially due to a number of reasons including inflation.
"If the interest rate for savings tools are raised, people will be encouraged to deposit money here, helping the government reduce its dependence on bank borrowing," he added.
