Government borrowing from commercial banks has surged by 74% in the current fiscal year as private sector credit growth remains low and authorities aim to reduce central bank debt under a contractionary monetary policy. Between July and 20 February, the government borrowed Tk78,832 crore through Treasury bills and bonds, compared to Tk45,231 crore in the same period last year. This has brought outstanding commercial bank debt to Tk3.97 lakh crore, while central bank debt has dropped by 40% to Tk94,042 crore. Experts suggest that without this shift, excess liquidity could have fueled inflation. The lack of private sector loan demand has made treasury investments attractive for banks, with interest rates exceeding 12%. Private sector credit growth fell to 7.28% in December, missing the 9.8% target for the first half of FY25. The government plans to borrow Tk1,17,000 crore domestically, with Tk99,000 crore from banks. Economists urge a reduction in government borrowing to ease pressure on private sector credit growth.
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