Business Report :
Government borrowing from banks significantly declined in the first quarter (Q1) of the current fiscal year of 2025-26 as its borrowed Tk 4,468 crore from the central bank during the first three months and repaid Tk 4,895 crore, resulting in negative net borrowing of Tk 426 crore from the banking system, according to the latest Bangladesh Bank data.
The national budget for the current fiscal year set a target of Tk 104,000 crore for government borrowing from the banking sector.
According to central bank data, government bank borrowing amounted to Tk 72,372 crore in the fiscal year 2024-25, down from Tk 94,282 crore in FY 2023-24.
Earlier, in first two months (July- August) in FY26, the government repaid Tk 3,105 crore to Bangladesh Bank while borrowing only Tk 588 crore from commercial banks, leaving net borrowing from the banking system at negative Tk 2,516 crore.
Sector insiders said that the government had been deliberately restraining borrowing from commercial banks, part of a cautious approach to managing inflation and borrowing costs.
This restraint aligns with the central bank’s monetary policy objective to keep inflation below 7 per cent by December and reduce dependence on high-powered money creation.
Officials at the finance division and central bank noted that borrowing from commercial banks became less attractive due to high interest rates, which increased the government’s debt-servicing burden.
Instead, the government has recently preferred external borrowing from multilateral and bilateral sources at lower costs.
However, a senior Bangladesh Bank official said that borrowing could rise later in the fiscal year as election-related expenditures increased and development projects accelerated.
Meanwhile, interest rates on government treasury bills have dropped sharply by 2.5 percentage points over the past three months as the government reduced its borrowing from commercial banks and easing liquidity pressure on the money market.
According to Bangladesh Bank latest data, yields on 91-day, 182-day and 364-day treasury bills fell to 9.5 per cent, 9.71 per cent and 9.6 per cent respectively on Sunday — down from about 10 per cent in September and nearly 12 per cent in June 2025.
Similarly, yields on longer-term instruments have also fallen. In September 24 auction, 20-year treasury bond yield declined to 9.63 per cent and 15-year bond to 9.66 per cent, while 5-year bond yield fell to 10 per cent on September 10. Just three months earlier, these rates ranged between 12.28 and 12.44 per cent.
Bankers expected yields to decline further as liquidity in the banking system remains ample and private credit growth remains sluggish. Private sector credit growth slowed to 6.35 per cent in August, reflecting weak business confidence amid a cautious investment climate.
Inflation, however, came down and remained below 9 per cent during June to September after remaining above that level for 27 consecutive months, offering some relief to policymakers.
