The government has increased its borrowing through treasury bonds and bills, moving away from direct bank borrowing, which has been a significant factor in the prolonged rise in the inflation rate, now at 9%, amid lower-than-expected revenue collection.
The government’s borrowing through bills and bonds has increased fivefold, with interest rates on these bonds rising from between 6.8% and 8.9% to 12-13% in May this year. In the 2023-24 fiscal year, Tk 62,812 crore was raised through these securities, up from Tk 13,456 crore the previous year, and Tk 41,683 crore was borrowed in FY24 compared to Tk 14,072 crore in FY23.
The central bank stated that while borrowing through bonds and bills has surged, direct borrowing from banks has declined in FY24. The government is issuing bonds to clear arrears of electricity and power producers. This shift towards bonds indicates that the government has responded to widespread concerns about excessive borrowing from the banking system, which has been exacerbating inflation.
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