Staff Reporter :
The government’s borrowing from banks has risen sharply in the first eight months of the Financial Year 2024-25 due to weak revenue mobilisation, slow private sector credit growth, and an overall economic slowdown.
According to recently published data from Bangladesh Bank, borrowing from banks reached Tk 86,000 crore during the July-February period, significantly higher than Tk 44,137 crore in the same period of the previous financial year.
The government’s net borrowing stood at Tk 26,225 crore in this period, compared with Tk 12,298 crore a year earlier, as it repaid Tk 59,780 crore to Bangladesh Bank, reducing reliance on direct central bank financing.
Meanwhile, private sector credit growth dropped to 7.15 per cent in January-the lowest in a decade – due to high interest rates and political uncertainty, reflecting declining confidence in the economy.
With businesses reluctant to borrow, banks found themselves with excess funds and opted to invest in government treasury bills and bonds instead.
The government’s increased reliance on commercial banks resulted from the Bangladesh Bank’s policy shift aimed at controlling inflation by avoiding direct money printing.
Experts noted that the government had little choice but to borrow heavily from commercial banks as the central bank had suspended direct lending.
Some financially unstable banks, restricted from lending to businesses, redirected their funds into government securities.
The central bank had previously barred several institutions from issuing fresh loans after uncovering extensive irregularities, which left them struggling to repay depositors.
In response, Bangladesh Bank restructured the boards of 14 troubled banks to restore stability.
Additionally, the lack of viable investment opportunities amid economic uncertainty and excess liquidity in the banking system made treasury instruments a safe and convenient option. Excess liquidity rose by 19.67 per cent to Tk 2.34 lakh crore in January, up from June 2024, as banks accumulated idle funds.
Despite this liquidity, banks’ overall lending capacity remained weak due to high levels of non-performing loans, increasing deposit withdrawals, and rising cash circulation outside banks amid persistently high inflation.
Meanwhile, domestic revenue mobilisation from July to January of the current fiscal year fell short of the target by nearly 21 per cent, raising concerns about the macroeconomic outlook and the government’s ability to meet necessary expenditures, according to National Board of Revenue (NBR) data.
In the first seven months, the NBR collected only 42.25 per cent of the revised target of Tk 4.63 lakh crore for FY25. To achieve this target, the revenue board will need to collect Tk 53,527 crore per month from February to June.
