Govt Borrowings from Banks Reach Record High of Tk29,697 Crore in Apr’23

In October 2023, Bangladesh witnessed a rise in private sector credit growth to 10.09%, up from September's 9.69% but notably lower than the 13.91% recorded in October 2022. Analysts express concern that this marginal growth may not truly signify effective economic development.

The government's short-term borrowing through treasury bills witnessed a 50 basis points surge to 11%, attributed to heightened demand for bank loans by state authorities. In the recent auction, the government borrowed Tk4,218 crore at a 10.8% interest rate for 91 days, Tk501 crore at 11% for 182 days, and Tk422 crore at 11.20% for 364 days.

The Six-Month Moving Average Rate of Treasury Bill (SMART), Bangladesh's benchmark interest rate, experienced a noteworthy 29 basis points surge in November 2023, reaching 7.72% —the highest since its inception. This increase, driven by the central bank's effort to combat inflation and tighten liquidity, signals a potential rise in loan costs.

Bangladesh's fiscal deficit expanded to Tk 1.98 trillion in the FY 2022-23, surpassing the previous year's Tk 1.84 trillion, due to slower-than-expected tax collection and increased spending. The total budget for FY2022-2023 rose to Tk 5.63 trillion from Tk 5.20 trillion.

In FY23, the government executed only 86.15% of the revised budget for the fiscal year, citing global war repercussions and domestic inflationary pressures as contributing factors. This represents a 2.52 percentage point decline from the previous fiscal year. The total spending amounted to Tk 5.65 trillion, falling short of the Tk 6.56 trillion revised budget.

The 8th Five-Year Plan (8FYP) in Bangladesh has encountered challenges due to global inflationary pressures from the Ukraine War, with key targets off track, according to a planning ministry review. The report reveals that the balance of payment targets was derailed in the first half of the 8FYP.