Govt eying to borrow Tk 1.36 lakh crore from banks in FY24
Muhid Hasan :
The government is going to borrow Tk 1.36 lakh crore from banking for financing the budget deficit in the upcoming financial year of 2023-24 which is nearly Tk 30 thousand crore more than the current fiscal year.
According to financial experts, the increasing dependency on banks for fiscal deficit financing might lead to a crowding out effect which may further reduce private investment and eventually reduce the potential economic growth of the country.
The FY 24 budget is likely to be amounted at Tk 7.6 lakh crore,against the current outlay of Tk 6.78 lakh crore.
According to the document from finance ministry, the budget deficit is estimated to be Tk 2.60 lakh crore, of which Tk 1.36 lakh crore is targeted to be sourced from the banking system.
However, the government had set a target of borrowing Tk1.06 lakh crore from the banking sector to meet the budget deficit for FY23.
In first ten months (July-April) of the FY23, the government borrowed a total of Tk 82,057 crore from banks, and around 80 per cent of this fund was provided by the central bank.
According to data from the central bank, the government’s total borrowing from the country’s banking system stood at Tk 3.56 lakh crore till April which was Tk 2.14 lakh crore on June 30, 2022. Of the amount, Tk 2.22 lakh crore has been taken from commercial banks.
A large part of the amount borrowed from the central bank has been provided through government treasury bills and bonds.
The central bank itself buys them by releasing money from the vault; known as devolvement, a part of which is supplied again by printing money.
The central bank made devolvement of more than Tk 11 thousand crore in last month, which stood at over Tk 66 thousand crore in the first 10 months of FY23.
When a central bank lends money to the government by printing additional currency, it is referred to as high-powered money, which can potentially result in higher inflation.
Finance division officials said the government has to increase bank borrowing due to lower revenue collection and increased demand for funds for project implementation and public procurements.
Mahbub Ahmed, former senior secretary of the Finance Division, said that if the government borrows Tk1.36 lakh crore from banks in the FY 24, there is a risk that the 33 per cent growth expected in the private sector investment in the next financial year will not be met.
Instead of deficit financing from domestic sources, emphasis should be given to increasing low-interest financing from foreign sources, he add.
The government is also targeting to borrow around Tk1 lakh crore from foreign sources to meet the budget deficit of the next fiscal year, which is only Tk 4,500 crore more than the target for the current fiscal year’s Tk 95,458 crore.
