Govt domestic debt rises by Tk1.51 lakh crore in a year

Highlights

• Total accumulated government domestic debt stands at Tk 11 lakh crore 
• Government bank borrowing reaches Tk 72,647 crore in the first seven months of FY26 
• Sharp rise in borrowing driven by operational expenditure and support for weak banks 
• Domestic debt pressure increases amid rising fiscal financing needs

The government's domestic borrowing has surged to a record level amid weak revenue collection and rising expenditure pressures, including election-related spending and support for the banking sector.

According to the latest Bangladesh Bank data, the stock of domestic government borrowing increased by Tk1,51,871 crore in the past one year.

Bankers said weak revenue collection and lower-than-expected foreign assistance have forced the government to rely heavily on domestic sources, pushing the total outstanding internal debt to around Tk11 lakh crore.

As of January, total outstanding domestic borrowing stood at Tk10,94,378 crore, compared to Tk9,42,507 crore in the same period last year, according to central bank data.

The report shows that in the first seven months (July-January) of the current fiscal year, the government borrowed Tk72,647 crore from domestic sources, sharply higher than Tk40,144 crore in the same period of FY2024-25.

Compared to the previous year, bank borrowing rose sharply to Tk64,923 crore this fiscal year, while non-bank sources stood at Tk7,723 crore. Last year, bank borrowing stood at only Tk15,531 crore, while non-bank sources contributed Tk24,612 crore.

Bank-wise data shows that government borrowing from the banking sector stood at Tk6,10,953 crore by January, while non-bank borrowing stood at Tk4,83,424 crore, bringing the total stock of government borrowing to Tk10,94,378 crore.

Another Bangladesh Bank report shows that between July and 30 March, the government borrowed Tk1,06,051 crore from domestic sources, meaning it has already exceeded its full-year borrowing target with three months still remaining in the fiscal year.

The government had planned to borrow Tk1.25 lakh crore domestically in the current fiscal year, including Tk1.04 lakh crore from the banking system and Tk21,000 crore from non-bank sources, of which Tk12,500 crore was expected from savings instruments.

However, data indicates that most of the borrowing so far has come from the banking sector.

Stakeholders said much of the borrowing increase took place during the tenure of the interim government, driven by election-related expenditure, capital support for weak banks and rising operational costs.

They added that revenue shortfalls have forced the government to depend more on domestic borrowing, increasing pressure on the financial system.

Each year, the government runs a large budget deficit, financed through both domestic and external sources. When foreign assistance falls short, reliance on domestic borrowing rises, particularly from banks, non-bank financial institutions, insurance companies, and savings instruments.

The interim government's Tk7.90 lakh crore budget carried an overall deficit of Tk2.21 lakh crore (including grants), equivalent to 3.5% of GDP. Excluding grants, the deficit stood at Tk2.26 lakh crore, or 3.6% of GDP.

Meanwhile, foreign debt stood at $113.51 billion as of December, equivalent to Tk13,92,668 crore at an exchange rate of Tk122.70 per US dollar. The figure compares with Tk9,49,011 crore recorded up to June, according to official data.