The government more than doubled its borrowing from the banking sources to meet the budget deficit in FY22 as revenue collection and sale of savings certificates dropped.
In FY21, the government borrowing from the banking sector was Tk26,078crore, which was Tk64,755 crore in FY22 – Tk38,677 crore more than the previous year, according to the provisional data of the central bank.
The target of government domestic borrowing for FY22 was reset at Tk1.24 lakh crore in the revised national budget while the target of borrowing from the banking system was reset at Tk87,287 crore. The government borrowed 74.18% of the targeted amount.
The rate of government borrowing at the beginning of FY22 was slow, but it sped up in June, because the revenue collection and sale of savings certificates decreased.
According to the National Board of Revenue (NBR), the government's revenue collection target for FY22 was Tk3.3 lakh crore, but Tk2.53 lakh crore was collected till May this year, according to officials. Consequently, the government increased borrowing from the banking sector as it had to pay the arrears of the annual development projects.
The government also targeted to borrow Tk37,001crore, including Tk32,000 crore through the sales of national savings schemes.
The government borrowed Tk18,157crore from savings certificates in the first eleven months of FY22, which was only 56.74% of the target.
Banks have increased their investments in government treasury bills as interest rates remain fixed against consumer loans.
Till May this year, the government borrowing from the banks was Tk32,652crore, which rose to Tk64,755 crore by the end of June. The government has taken almost the same amount of loan in one month as it did in the previous 11 months.
"The government has to pay the arrears of various development projects at the end of the fiscal year, which has led to an increase in the amount of debt. Besides, revenue collection was much lower," Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh told TBS.
On 27 June this year, the government borrowed Tk5,708crore and Tk756 crore through 91-day and 364-day treasury bills, respectively. The interest rate on the 91-day treasury bill was Tk5.99% and the 364-day bill was Tk6.66%.
On 28 June, the government borrowed Tk4,724crore from banks through 15-year and 20-year treasury bills. The interest rate for the 15-year treasury bill was 8.55% and for the 20-year treasury bill it was 8.65%.
On the next day, the government borrowed Tk5,650crore through two treasury bills of 91-day and 182-day.
Meanwhile, the target of implementing the Annual Development Projects (ADP) in FY22 was Tk2.17 lakh crore, but Tk1.42 lakh crore was implemented in the first 11 months of the fiscal, which was 65.56% of the target.
The government has set a target of borrowing Tk1.06 lakh crore from the banking sources in FY23.