The government's debt from the country's banking sector has been rising sharply, with approximately Tk 25,000 crore borrowed in just 40 days, from February 1 to March 10 this year.
In the first seven months of the fiscal year-from July 1 to January 31-the government's bank borrowing stood at Tk 13,571 crore. However, by 10 March, this figure had surged to Tk 38,510 crore, according to Bangladesh Bank statistics.
The increase in borrowing is attributed to lower revenue collection, reduced inflows from savings certificates, and a decline in foreign loan waivers. Bangladesh Bank (BB) officials noted that government borrowing typically rises towards the end of the fiscal year. However, the current borrowing remains below the fiscal target.
The Awami League government's budget had set a target of Tk 1,37,500 crore in bank loans for the fiscal year, later revised to Tk 99,000 crore by the interim government. At a recent central bank meeting, Bangladesh Bank Governor Ahsan H. Mansur stated that, given the current state of the banking sector, government borrowing is expected to be capped at Tk 90,000 crore for this fiscal year.
Despite the interim government's cost-cutting measures, outstanding loans and interest payments have risen significantly. Additionally, recurring expenditures, such as salaries and allowances, continue to grow annually.
In the first six months of the fiscal year, the National Board of Revenue's (NBR) income fell by Tk 1,543 crore to Tk 1,56,446 crore compared to the same period in the previous fiscal year. Net debt from savings certificates also turned negative, with repayments exceeding new loans by Tk 2,244 crore up to December. Furthermore, foreign loan waivers and commitments have declined, increasing reliance on bank loans.
As of 10 March in the 2024-25 fiscal year, the government had borrowed Tk 85,663 crore from commercial banks while repaying Tk 47,153 crore of earlier loans to BB. This borrowing from commercial banks, coupled with repayments to the central bank, has tightened the money market. However, the central bank has injected Tk 29,410 crore into weaker banks by printing money, slightly easing market liquidity.
During the previous government, certain business groups allegedly embezzled large sums under state sponsorship. As these loans remain unpaid, some banks are struggling to return depositors' funds. Consequently, BB has provided special loans in three phases since last November.
According to BB data, the government's total debt in the banking system stood at Tk 5,12,999 crore as of 10 March, up from Tk 4,74,490 crore at the end of last June. Debt in commercial banks rose to Tk 4,04,105 crore from Tk 3,18,441 crore during the same period, while the balance with BB decreased to Tk 1,08,895 crore from Tk 1,56,048 crore. The Tk 48,746 crore previously taken from BB under the 'overdraft' sector has now reduced to Tk 6,742 crore.
Experts have highlighted that high inflation has eroded people's savings capacity, with deposits growing by only 7.47 per cent last year. The central bank is repaying previous liabilities by borrowing against treasury bills and bonds. To curb inflation, the policy interest rate has been raised to 10 per cent, bringing inflation down to 9.34 per cent in February. The governor anticipates further reductions in inflation.
