Interest rates on government treasury bills and bonds have surged since March 2022, reaching 11.28% for 364-day T-bills in December 2023, the highest in 11 years. This increase, driven by government borrowing, tightens liquidity and attracts investors seeking zero-risk investments. As wealthy individuals and corporations divert funds to T-bills, banks may face reduced credit availability for private-sector lending. Despite government plans to borrow Tk 155.4 billion in FY24, concerns arise over tax revenue shortfalls affecting borrowing pressure. The CAL Bangladesh outlook suggests lending rates could hit 15.7 percent by June 2024, hindering private sector investment. While banks face challenges attracting deposits amidst rising T-bill rates, the excess liquidity may counterbalance credit constraints for private sector loans, though borrowing appetite remains uncertain amidst high-interest rates.
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