The government has borrowed a record Tk26,000 crore plus from banks in the first one and a half months of the current fiscal year.
This sum accounts for 45 percent of the overall target set in the national budget for the ongoing fiscal.
The amount of debt taken by the government in this period is only Tk197 crore less than that which had been taken in the 12 months of the previous fiscal.
This trend is a reversal from the trend three fiscal years ago. The government then met debt-liabilities instead of borrowing.
In 2016-2017 fiscal year, the government paid back Tk18,029 crore to banks.
But in the next fiscal year, the scenario changed. In that fiscal, the government borrowed Tk926 crore.
Since then, the government’s borrowing from the banking sector has kept rising.
When asked, economist Dr Zaid Bakht said, “As revenue collection per the target is not satisfactory, the government is turning to bank borrowing. This is not a good sign.”
On the other hand, sales of savings tools fell because of the imposition of some strict rules. As a result, the government’s debt-liabilities have come down.
He thinks this development is good to some extent.
The liquidity crisis has started easing. If the government borrows big amounts from the banking sector right now, there is a possibility that private investment will be discouraged, the economist pointed out.
When asked about so much borrowing in one and half months, finance ministry officials said from the current fiscal year, soon after the budget allocation, an approval was given for money spending before allocating funds for different ministries.
This way, spending on development projects started from July this year. The finance ministry had to provide funds to different sectors despite not getting expected revenue. Thus, the government turned to bank borrowing.
On the other hand, to discourage savers from buying savings tools, bankers and economists had long been urging the government to reduce interest on savings certificates.
But the government has come up with some strict rules in buying the certificates, instead of lowering interest rates.
It has been made mandatory to provide TIN number for buying savings certificates amounting to more than 1 lakh. And buyers are to do all transactions of savings tools through banks.
In the last fiscal year, the sales of savings tools were Tk90,280crore. As the borrowing target was fulfilled by selling savings tools, the government did not need to go to banks.
In the first month of the current fiscal, the revenue collection target was not achieved. The NBR could collected Tk1,000 crore less than its fixed target of Tk17,900 crore, said Ahsan Habib, deputy director of the National Board of Revenue (NBR).
The bank borrowing target for the last fiscal was set at Tk42,029. But due to astronomical sales of savings certificates, the loan requirement from the banking system had been reduced to Tk30,895 in the revised budget.
In the current fiscal, the government has fixed a target of Tk47,364 crore in bank borrowing. Normally, if the government borrows more from banks, the private sector may be discouraged.
For this reason, economists always advise to borrow from the banking system as less as possible.