Thursday, 27 January, 2022
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Govt’s bank borrowing drops

Govt’s bank borrowing drops

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# Bank borrowing totals Tk 148bn against Tk 191bn target in Q1

# Low dev expenditure, high sales of savings tools lead to lower fund demand

# ADP implementation also remains low in July-Sept period

The government’s borrowing from the local banking system and foreign sources has so far remained much below the target due to low development expenditure, high sales of saving tools and a sluggish investment scenario.

During the July-September quarter, the government borrowed Tk 95 billion less than its target set earlier for the period, including Tk 40 billion from the local banking system and Tk 55 billion from foreign sources.

The data were placed at the meeting of the Cash and Management Committee (CDMC) that discussed the borrowing situation chaired by Finance Secretary Abdur Rouf Talukder, finance ministry sources said.  

For the first quarter, the government had set a Tk 191.13 billion bank borrowing target, but actual bank loans stood at Tk 148 billion, which means that the periodical target was undershot by a big margin of Tk 43.14 billion.

Similarly, the expectation of foreign loans has not been fulfilled as development partners released Tk 166.84 billion against the government targeted Tk 244.35 billion for the first three months of FY22.

On the other hand, net savings certificates sales stood at Tk 116.62 billion, which was Tk 36.62 billion higher than the quarterly target. For FY22, the government has fixed Tk 320 billion borrowing targets. 

Main reason behind the high sales was that the interest rate on savings tools is higher than that of bank deposits.

Meanwhile, the government has taken Tk 91.40 from treasury bonds and Tk 56.60 from treasury bills.

The ministry of finance has taken necessary initiatives for keeping government bank borrowing within a reasonable level.

Cash and Management Committee (CDMC) under the ministry of finance has already finalized the target for taking loans from treasury bonds and bills, sources added. 

It also approved the first and second half-year auction calendar for treasury bonds and bills. 

Former caretaker government adviser Dr AB Mirza Azizul Islam thinks that the trend of low development expenditure in the first quarter led to low bank borrowing.

“Actually the government’s borrowing remained low in the first quarter mainly because of low development spending,” he said. 

“Usually, the accomplishment of planned development activities doesn’t cross 30 to 35 per cent in the first six months in our country, which finally rises to 80 to 90 per cent at the end of the year. The amount of loans will rise at that time,” he pointed out. m

IMED data show that ADP implementation was only 8.26 per cent or Tk 195.69 billion in the first quarter with six ministries or divisions failing to spend even 1 per cent of their allocation.

While explaining the reason behind low bank borrowing, a senior finance ministry official said despite the cut, the interest rate is still high on saving tools compared to that parked at banks. He also acknowledged the slow development activity.

Instead of bank borrowing, the official suggested taking long-term softer loans from foreign development banks like the World Bank, ADB and other agencies.

For the current fiscal year, the government had targeted to take Tk 764.52 billion loans from banks.

In the recent meeting, CDMC has decided to take Tk 517 billion loans from treasury bonds and Tk 247.52 billion from treasury bills.