Bangladesh govt back to borrowing from Cenbank amid cash crunch | The Business Standard
Skip to main content
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
The Business Standard

Monday
July 07, 2025

Sign In
Subscribe
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
MONDAY, JULY 07, 2025
Bangladesh govt back to borrowing from Cenbank amid cash crunch

Economy

Jebun Nesa Alo
23 December, 2023, 08:50 am
Last modified: 23 December, 2023, 01:28 pm

Related News

  • Conquered Ganobhaban, will triumph in parliament too: Nahid
  • No objection to February polls but oppose a hastily arranged one: Jamaat
  • National Consensus Commission to resume reform talks tomorrow
  • Gazette published asking Hasina, 99 others to appear before court
  • July uprising shows dream of justice-based country: Nahid Islam

Bangladesh govt back to borrowing from Cenbank amid cash crunch

Jebun Nesa Alo
23 December, 2023, 08:50 am
Last modified: 23 December, 2023, 01:28 pm

Faced with an urgent need for cash to cover everyday expenses, the government has resorted to borrowing again from the Bangladesh Bank. The move stems from the severe cash crisis, caused by greater expenses than income amid a dwindling revenue stream.

The central bank has been providing temporary liquidity support to the government's daily transaction account by generating high-powered money, also known as printing money, carrying the risk of fuelling inflation, which reached nearly 10% in October.

The government has been borrowing through its two accounts – Ways and Means Advances, and Overdraft – as the cash crisis worsened since the central bank stopped printing money through a devolvement process amid huge criticism. Devolvement is when the Bangladesh Bank itself purchases treasury bills and bonds instead of selling to commercial banks.

However, borrowing money through these accounts is akin to printing money.

The Business Standard Google News Keep updated, follow The Business Standard's Google news channel

An overdraft occurs when there is not enough money in an account to cover a transaction or withdrawal, but the bank allows the transaction anyway.

Ways and Means Advances (WMA) is a mechanism used to provide temporary lending facilities for temporary mismatches in the cash flow of the government's receipts and payments.

Gov is borrowing more than its limits

The finance ministry has set the limit at Tk8,000 crore for overdraft and Tk8,000 crore for WMA but the government already exceeded the limit in both accounts indicating a severe cash crisis.

The government's borrowing from both accounts crossed Tk18,000 crore on 6 December against the combined ceiling of Tk16,000 crore, according to Bangladesh Bank data.

Dr Ahsan H Mansur, an economist and executive director of the Policy Research Institute (PRI), told TBS that the government's borrowing through overdrafts and WMAs is another way of printing money, which risks fuelling inflationary pressures.

The government has 116 accounts with the Bangladesh Bank through which it conducts various transactions. At the end of the day, the Bangladesh Bank checks the government's balance through the overdraft and WMA accounts. If the government is in a negative balance, the Bangladesh Bank provides cash support by generating new money.

The borrowing amount is adjusted within 30 days from the government's receipts. The Bangladesh Bank charges 5.75% for lending in WMA and 6.75% for overdraft when the treasury bills rate is above 10%. So, borrowing through overdraft and WMA is less costly for the government than borrowing through treasury bills and bonds.

In the devolvement process, the Bangladesh Bank generates new money against the government's treasury bills and bonds. In this case, the Bangladesh Bank itself purchases treasury bills and bonds instead of selling to commercial banks.

The central bank has stopped printing money through the devolvement process since August to curb the money supply to ease inflationary pressure. In FY23, the central bank printed Tk88,000 crore new money to provide deficit financing support to the government.

The government borrowing from commercial banks increased substantially after the central bank stopped printing money. From July to December of FY24, the government borrowed Tk31,868 crore from commercial banks through treasury bills and bonds when the borrowing declined by Tk16,000 crore in the same period of last fiscal year, central bank data shows.

The government's huge borrowing shot the interest rate to above 10% for short-term treasury bills and bonds and above 11% for long-term bills and bonds when the rates were 7% to 8% six months back.

A senior executive of the Bangladesh Bank said despite huge borrowing, the government experienced a financial crisis because of a deficiency in daily revenue rather than expenditures, compelling it to immediately borrow funds from the central bank.

Commercial banks and exporters have also been feeling the pinch of the government's cash crisis. Exporters are experiencing delays in payment release of their cash incentive against exports when commercial banks are facing a liquidity crisis due to the government's high borrowing.

Tight liquidity will slow down business 

Describing the current money market situation, Syed Mahbubur Rahman, managing director of Mutual Trust Bank, told TBS that banks are in a tight liquidity position due to high government borrowing and policy rate hikes by the central bank. 

He said the interest rate for short-term treasury bills and bonds crossed 10% when the lending rate remained almost the same. As a result, banks will prefer to invest in treasury bills and bonds instead of lending to the private sector, which will slow down private sector business expansion.

Banks have been experiencing delays in the release of cash incentives for exporters. The Bangladesh Bank generally disburses cash incentive funds quarterly. But now it is delaying disbursement by one and half months since June, Mahbubur Rahman said.

When contacted, a top official of the central bank said applications for cash incentives have piled up but the central bank is delaying disbursement due to not getting funds from the government amid the ongoing cash crunch.

Meanwhile, the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) recently wrote to the finance ministry to disburse the pending Tk4,000 crore in cash incentives kept for exporters within December.

The BKMEA letter also mentioned that the sector is grappling with pending claims exceeding Tk4,000 crore in cash assistance from the Bangladesh Bank, which is causing severe financial distress to the sector.

Infograph / Top News

Cenbank / Bangladesh / Bangladesh Bank / govt borrowing

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Illustration: Duniya Jahan/TBS Creative
    Inflation drops below 9% after 27 months
  • Representational image. Photo: Investopedia
    GDP grows 4.86% in Q3 FY25 
  • News of The Day, 07 JULY 2025
    News of The Day, 07 JULY 2025

MOST VIEWED

  • Ships and shipping containers are pictured at the port of Long Beach in Long Beach, California, US, 30 January 2019. Photo: REUTERS
    Bangladesh may offer zero-duty on US goods to get reciprocal tariff relief
  • A quieter scene at Dhaka University’s central library on 29 June, with seats still unfilled—unlike earlier this year, when the space was overwhelmed by crowds of job aspirants preparing for competitive exams. Photo: Tahmidul Alam Jaeef
    No more long queues at DU Central Library. What changed?
  • Labour unrests disrupt CEPZ operations as financial crisis hits factories
    Labour unrests disrupt CEPZ operations as financial crisis hits factories
  • Infographic: TBS
    Japanese loan rate hits record 2%, still remains cheaper than others
  • Students during a protest procession seeking end of discrimination in engineering jobs in Chattogram on 5 July 2025. Photo: TBS
    Ctg students protest against discrimination in engineering profession
  • Benapole port: Revenue exceeds target by Tk316cr while imports decline
    Benapole port: Revenue exceeds target by Tk316cr while imports decline

Related News

  • Conquered Ganobhaban, will triumph in parliament too: Nahid
  • No objection to February polls but oppose a hastily arranged one: Jamaat
  • National Consensus Commission to resume reform talks tomorrow
  • Gazette published asking Hasina, 99 others to appear before court
  • July uprising shows dream of justice-based country: Nahid Islam

Features

Thousands gather to form Bangla Blockade in mass show of support. Photo: TBS

Rebranding rebellion: Why ‘Bangla Blockade’ struck a chord

1h | Panorama
The Mitsubishi Xpander is built with families in mind, ready to handle the daily carpool, grocery runs, weekend getaways, and everything in between. PHOTO: Akif Hamid

Now made-in-Bangladesh: 2025 Mitsubishi Xpander

20h | Wheels
Students of different institutions protest demanding the reinstatement of the 2018 circular cancelling quotas in recruitment in government jobs. Photo: Mehedi Hasan

5 July 2024: Students announce class boycott amid growing protests

2d | Panorama
Contrary to long-held assumptions, Gen Z isn’t politically clueless — they understand both local and global politics well. Photo: TBS

A misreading of Gen Z’s ‘political disconnect’ set the stage for Hasina’s ouster

3d | Panorama

More Videos from TBS

Inflation drops below 9%

Inflation drops below 9%

1h | TBS Today
How much impact has Trump's tariff policy had on the market?

How much impact has Trump's tariff policy had on the market?

2h | Others
New telecom policy will prevent corruption: Faiz Ahmad Taiyeb

New telecom policy will prevent corruption: Faiz Ahmad Taiyeb

2h | TBS Today
How Anas' letter and Safwan's shirt became symbols of the July Uprising?

How Anas' letter and Safwan's shirt became symbols of the July Uprising?

16m | TBS Stories
EMAIL US
contact@tbsnews.net
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Advertisement
  • Privacy Policy
  • Comment Policy
Copyright © 2025
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net