Govt’s bank borrowing hits four-year high

Hasibul Aman

23 August, 2019 12:00 AM printer

The government’s borrowing from the banking system has hit the highest in four years in FY19 despite a brisk sale of savings certificates, mainly thanks to a squeeze in revenues. 

Bank borrowing to meet the budget deficit finally soared to Tk 26,446 crore whereas the government had set the borrowing target at Tk 42,030 crore in FY 2018-19 national budget, official data suggest.

In 2017-18 fiscal year, the government borrowed only Tk 926 crore against Tk 19,917 crore target set for the year.

In FY17, the government repaid Tk 18,029 crore more bank loans than what it borrowed. In the previous year, total borrowing was Tk 4,807 crore and in FY15 the total bank borrowing was Tk 6,870 crore.

In the context of a lacklustre revenue collection by National Board of Revenue (NBR), the government had to manage funds for some ongoing large projects like the Padma Bridge, power plants and metro rail.

The situation led the government to go for higher bank borrowing in the last fiscal year in spite of blistering savings tools sale, official sources said.

NBR missed its revenue collection target by a large margin as it could manage to mobilize Tk 2,25,000 crore in the end in FY19 against its target of Tk 2,96,201 crore.

Out of the last fiscal’s total borrowing, Bangladesh Bank provided Tk 10,333 crore loans and scheduled commercial banks Tk 16,133 crore.

Had the central bank not supplied the loan, the banking sector would have witnessed more cash crunch, according to BB officials.

In total, the government’s cumulated loans from the banking system stood at Tk 1,14,704 crore until June, including Tk 33,979 from Bangladesh Bank and Tk 80,725 crore from commercial banks.

Simultaneously with the rise in bank borrowing, the loan interest rate went up as well, official sources informed.

In June, the interest rate soared to 8.05 per cent which was below 7 per cent at the outset of the fiscal year.

However, the government pays a much higher rate from 11.04 per cent to 11.76 per cent on savings certificate, excluding source tax on their monthly interest.

Meanwhile, borrowing from savings certificate skyrocketed to nearly Tk 50,000 crore in FY19 against original borrowing target of Tk 26,197 crore which was later increased to Tk 45,000 crore after high sales trend. For the current fiscal year, the government has announced Tk 5,23,190 crore budget with Tk 1,45,000 crore or GDP’s 5 per cent budget deficit.

Of the budget deficit, Tk 77,363 crore will be met from local resources, including Tk 47,363 crore from banks, Tk 27,000 crore from saving tools sale and Tk 3,000 crore from the non-bank source.