In the first six months of the current fiscal year, the government borrowed Tk69,056 crore from commercial banks.
However, during the same period, it repaid Tk54,413 crore of previous loans from Bangladesh Bank, resulting in a net bank borrowing of Tk14,643 crore.
Notably, during the corresponding period last year, the government had not taken any loans from banks but instead repaid Tk3,286 crore to Bangladesh Bank from previous borrowings.
The government's borrowing from savings certificates has also increased, with Tk8,332 crore borrowed in the first three months of the fiscal year, compared to a negative borrowing of Tk1,265 crore during the same period last year, according to updated reports from Bangladesh Bank.
Many banks are currently resorting to borrowing from Bangladesh Bank due to liquidity shortages, with daily borrowings through repo facilities ranging from Tk5,000 to Tk6,000 crore.
Despite this, the government has primarily leaned on commercial banks for loans in the first half of the fiscal year, using these funds to repay previous loans from Bangladesh Bank.
The government is also seeking to bolster reserves through foreign loans.
In the previous fiscal year, the government borrowed Tk1,073 crore from commercial banks, but significant repayments to Bangladesh Bank reduced the total net borrowing from the banking system to Tk94,282 crore.
Officials from Bangladesh Bank attribute the government's increased reliance on bank loans to lower-than-expected revenue collections and delays in securing desired foreign loans.
They have cautioned that high government borrowing from banks can hamper the private sector's access to necessary credit.
Dr Mirza Azizul Islam, a senior economist and former financial adviser to the caretaker government, expressed concerns over the liquidity crisis in many commercial banks, warning that excessive government borrowing could impact private sector investments and job creation, thereby straining economic growth.
The government has set a revenue collection target of Tk4,30,000 crore for the fiscal year 2024-25, requiring a monthly average of Tk35,833 crore.
However, in the first five months, there was a revenue shortfall of Tk42,230 crore, with the National Board of Revenue (NBR) failing to meet its monthly targets.
The slowdown in private sector credit growth, which stood at 7.66% at the end of the first four months of the fiscal year—the lowest in three and a half years—has coincided with reduced imports of intermediate goods and capital machinery.
Import financing for capital machinery fell by 26%, and for intermediate goods by 11.52%, with corresponding declines in settlement rates.
Economists recommend the government enhance revenue collection efforts instead of further increasing borrowing from banks.
They warn that high borrowing from commercial banks can restrict credit availability to the private sector, potentially dampening investment and economic growth.
Global Islami Bank Chairman Mohammad Nurul Amin highlighted that banks are profiting from lending to the government at higher interest rates but cautioned that this situation could lead to long-term economic challenges.
A senior official from Bangladesh Bank, speaking anonymously, noted that while banks benefit from lending to the government, the private sector faces increased pressure, leading to a dip in private sector credit growth.
The government has set a borrowing target of Tk1,37,500 crore from the banking sector to bridge the fiscal deficit for this year.
As of 30 December, the total outstanding government debt from banks stood at Tk4,59,847 crore, down from Tk4,74,489 crore at the end of June.
