The government’s borrowing from banks has escalated alarmingly on the back of a revenue shortfall. The government already borrowed Tk 43,411 crore from the banking sector as of November 17, which is 92 percent of its full-year target, according to data from the central bank.
Of the total amount, the government borrowed Tk 37,374 crore from banks and the rest from the central bank.
In the first four months (July-October) of the current FY 2019-20, the government’s net borrowing was Tk 33,587 crore against Tk 535.90 crore in the same period of FY 2018-19.
As per the Bangladesh Bank data, the government’s outstanding borrowing from the banking sector increased to Tk 141,683 crore on October 30 this year from Tk 108,096 crore on June 30 this year.
Economists analyzed that, high expenditure pressure for financing mega projects and salary payment, slowdown in sales of national savings certificates (NSC) and the stagnancy in revenue collection by the National Board of Revenue (NBR) were the reasons for the sharp rise in the government’s borrowing from the banking sector.
Economists stressed that woe of the banking sector further worsens in addition to the existing liquidity crisis of the sector in recent months. They also fear that the government borrowing from banks may hit Tk 100,000 crore at the end of fiscal 2019-20, more than double the target of Tk 47,364 crore for the year.
Between July and September, the first three months of the fiscal year 2019-2020, NBR collected about Tk 47,388 crore against the target of Tk 62,295 crore for the period. The revenue collection grew only by 2.6 percent in July-September, one of the lowest in decade.
Besides, the net sales of National Savings Certificate (NSCs) dropped by 59.59 percent year-on-year in the July-August period of the current fiscal year because of tightening of sales process and hike in tax on interest. The borrowing from savings certificates and bonds has decreased due to a 10 percent tax on profit.
In this situation, the private sector may face further consequences if the government continues to borrow large amounts from banks. Inclusive GDP growth will not be achieved without a proper expansion of the private sector, which would then go on to have a negative impact on employment creation, Economists stressed.
The bankers suggested that the government should mobilise its required fund from alternative sources like the bond market, foreign agencies and other possible sources.
In the budget for FY2019-20, the revenue collection target was set at Tk 377,810 crore, leaving deficit at Tk 145,380 crore. Of the revenue collection target, the government set Tk 325,600 crore target for the NBR, up 16.29 percent or Tk 45,600 crore on the revised Tk 2,80,000 crore target it had set from the fiscal year 2018-2019.
For deficit financing, the government has planned to borrow Tk 63,848 crore from overseas sources and the rest Tk 77,363 crore from domestic sources.
Of the borrowing target from the banking sector, the government has planned to borrow Tk 47,364 crore from the banking sector; Tk 28,094 crore as long-term debt and Tk 19,270 crore as short-term debt.
Apart from the bank borrowing, another Tk 29,999 crore would be borrowed by the government from the domestic sources, especially by selling national savings certificates.
The government’s net borrowing from the banking sector was Tk 19,800.9 crore in the entire fiscal year of 2018-2019.
Instead of taking money, the government repaid Tk 2,851.2 crore against its borrowing from the banking sector in FY18. In FY17, the bank loan repayment by the government was Tk 18,405 crore.
The situation has raised doubts about the GDP growth rate achieved in recent years. As per the government’s calculation, Bangladesh targeted an 8.13 percent GDP growth in fiscal 2018-19, one of the highest in the world.
