The government’s continued borrowing from scheduled banks, coupled with repayments to the central bank, is exacerbating a liquidity crisis in Bangladesh’s banking sector. In the first five months of FY24, the government borrowed Tk 27,952 crore from scheduled banks while repaying Tk 35,798 crore to the central bank, impacting funds available for private sector loans.
Critics argue that increased reliance on scheduled bank borrowing is impeding private sector credit growth, evident in the sector’s decline from June. Analysts note the government’s persistent revenue deficit and emphasize the need for a strategic plan to address the revenue problem.
The central bank’s tightened monetary policy, aiming to curb inflation, contributes to the liquidity crisis. The private sector credit growth reached 9.90% in November 2023, indicating a downward trend over the last five months. The government’s borrowing target from the banking system for FY24 is set at Tk 1,32,000 crore to cover the budget deficit.
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