Govt domestic borrowing dips 61% in first quarter
Sales of savings tools increased rapidly during July-September, with the government having already attained more than half the target set for the current fiscal year
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The government's tendency to borrow from internal sources for the budget implementation has decreased drastically.
In the first quarter of the current fiscal year, the government has borrowed about one-third of the amount it borrowed in the corresponding a year ago.
The Bangladesh Bank's monthly report titled "Government's Domestic Borrowing" published on Wednesday revealed this information.
The report prepared on the July-September data states that the government has borrowed Tk12,874 crore from banks and the non-bank sectors, down from Tk33,305 crore year-on-year.
The government has set a target to borrow around Tk110,000 crore from domestic sources in the current financial year.
Asked about it, Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office, told The Business Standard that the amount of foreign aid increased towards the end of the last fiscal year (May and June).
The government is spending that money in the current financial year, showing that it was received last year, he added.
"On the other hand, government expenditures have dropped, thanks to the Covid-19 pandemic. Besides, the surplus fund of autonomous organisations is going back to the government treasury, along with an increase in sales of savings tools. The ADP implementation rate is not that much high too."
Due to these reasons, the government is not facing a financial crisis in implementing the budget even though the revenue collection is low, Zahid Hussain added.
During the July-September period of this fiscal year, the National Board of Revenue (NBR) collected tax amounting to about Tk50,000 crore. The revenue collection target set for the current fiscal year is Tk330,000 crore.
The ADP implementation rate during the same period was over 8%, same as the proportion observed in the same period in the previous year.
The government usually borrows the highest amount from banks.
It has set a target to borrow around Tk85,000 crore from the sector in fiscal year 2020-21.
However, the government did not take any loan from banks in the first three months ((July-September) of the fiscal. Instead, it repaid Tk1,048 crore from previous loans.
In the period last year, the government's bank borrowing amounted to Tk27,600 crore.
Meanwhile, sales of savings certificates increased rapidly during these months, with more than half the target set for the current fiscal year having been already attained.
Even though the government targets borrowing Tk20,000 crore from the sector in the current financial year, net savings certificates worth Tk11,662 crore were sold during the July-September, up from Tk4,698 crore year-on-year.
Since the interest rate on savings certificates is much higher than that on bank deposits, savers are more inclined to buying these instruments, opined Dr Zahid Hussain.
However, many view that making automation and tax identification number mandatory for sales of savings certificates and setting the investment ceiling at maximum Tk50 lakh to this sector have been disturbing people's tendency to savings.
The government's leaningon internal borrowings will rise in the coming months, Zahid Hussain said, adding the government feels a lower pressure as the ADP implementation pace at the beginning of a fiscal year remains usually low.
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