Muhid Hasan :
Government net borrowing from commercial banks stood at Tk 42,248 crore at the end of mid-April, representing a little over 42 per cent of Tk 99,000 crore target set for borrowing from the banking system in the current financial year.
According to recent Bangladesh Bank (BB) data, government borrowing from commercial banks had reached Tk 98,579 crore till the first half of April, FY25.
However, net borrowing from the banking system decreased by Tk 4,107 crore over the first nine and a half months of the fiscal year.
For comparison, net bank borrowing was Tk 46,355 crore during the same period of the previous fiscal year.
Net bank borrowing refers to the amount the government has borrowed from banks, minus the amount repaid to the central bank.
Moreover, by the second week of April in the current fiscal year, the government had repaid over Tk 56,000 crore to the Bangladesh Bank – almost three times higher than the amount repaid during the same period in the previous fiscal year.
People were then grappling with high inflation because of the fresh injection of Tk 60,000 crore into the market by ousted Sheikh Hasina’s government.
Experts have argued that the current level of public borrowing remains tolerable given the present economic circumstances.
Amid sluggish revenue collection, a declining inflow of foreign loans, and low demand for private sector credit, increased government borrowing from commercial banks is viewed as the best available alternative under current conditions.
Zahid Hussain, former lead economist at the World Bank’s Dhaka office, told The New Nation that despite weak revenue growth, the government had little choice but to borrow heavily from commercial banks while repaying debts to the central bank in line with ongoing monetary policy.
Analysing the interim government’s net bank borrowing target of Tk 99,000 crore, Zahid Hussain noted that the current rate of borrowing remains manageable.
However, he cautioned that the sharp increase in borrowing since March is likely to continue in the final two months (May and June) as budgetary pressures mount.
He pointed out that revenue collection in the first nine months fell short of the target by around Tk 66,000 crore, while implementation of the Annual Development Plan (ADP) stood at only 36 per cent for the same period.
The combination of sluggish revenue mobilisation and the usual fourth-quarter spending surge is likely to force the interim government to rely increasingly on bank borrowing, he predicted.
Eminent economist and academic Muinul Islam welcomed the government’s effort to reduce reliance on direct central bank financing, noting that repayments to the Bangladesh Bank have been nearly three times higher this fiscal year compared to the previous one.
Addressing concerns over a potential ‘crowding out’ effect, he said that while credit flow to the private sector has declined throughout this fiscal year, the slowdown cannot be attributed solely to public sector borrowing.
He cited additional factors such as uncertainty in the investment climate and weak loan recovery processes as significant contributors to the stagnation in private credit growth.
Muinul Islam suggested that the government should consider reducing its borrowing plans from commercial banks in the upcoming financial year, to ensure easier credit availability for local private firms.
