In the first five months of this fiscal year, net government borrowing from the banking system was Tk40,163 crore, which is 85 percent of fiscal target.
Executive Director of Bangladesh Bank Md Serajul Islam told The Business Standard, "The government makes a yearly target of bank borrowing which can rise and fall. The high borrowing might get low at the end of the year. So, there's nothing to be worried about during the middle of the fiscal year."
In the fiscal year 2019-20, the government has set a target of borrowing Tk47, 363 crore from the banking sector to meet the budget deficit.
Recently, the government has been heavily relying on the banking sector to implement the Annual Development Program (ADP), thanks to a big fall in revenue earnings, said experts.
In FY20, the government set a revenue collection target of Tk3 lakh 25 thousand 600 crore. National Board of Revenue has collected Tk65,096 crore till October - Tk20,220 crore short of the target.
Chairman of Agrani Bank Limited and Research Director of Bangladesh Institute of Development Studies Dr Zaid Bakht told The Business Standard, "Government borrowing fluctuates throughout the year, depending on revenue earnings. When revenue earnings increase, the government's bank borrowing decrease. Last year, the government paid the money back to the banking system after making revenue earning."
"The pressure of ADP implementation is making the government heavily borrow from the banks, perhaps," he explained.
Data of Implementation, Monitoring and Evaluation Department of Planning Commission shows that during July-November of FY20, the ADP implementation rate has been19.24 percent, which was 20.15 percent in the same period last year.
From FY20, the government has tightened the investment policy of national savings instrument, causing a fall in national savings certificate sale.
During the July-October period of 2019, the government made a net borrowing of TK5,521 crore from this instrument, which was TK17,828 crore in the same period of the previous year.
In FY20, the government has set a target of Tk 27,000 crore net borrowing from savings instrument.
However, experts have welcomed the move of policy tightening.
Recently, Finance Minister AHM Mustafa Kamal said, "The government mainly borrowed from national savings in the past to meet the budget deficit. But this year it has decided to borrow more from the banking system."
"There is a rumour - the government is emptying the banks. Why would it do that? We will borrow from two sources; borrowing from savings instruments being the main one."
"We could not bridge the gap between revenue collection and expenditure, experiencing a budget deficit every year. So, the government has to borrow. And if it does not borrow from the banks, where would it get the money from?" Kamal explained.
As the government is heavily borrowing from the banking system, the private sector credit growth is falling. Year-on-year credit growth dipped to 9.87 percent in November this year, breaking the previous month's lowest rate of 10.04 percent in recent history.