Govt’s bank borrowing increases by Tk11,000cr in March

Infograph: TBS

The government borrowed around Tk17,770 crore from the banks, while it collected only Tk1,409 crore from non-banking sources in February and March of this year. 

The government borrowed around Tk6,803 crore in February and around Tk11,000 crore from the banking sector in March this year.

According to a Bangladesh Bank report, the government has borrowed Tk52,360 crore from the banking system from July to March in FY23. Out of that amount, Tk50,380 crore (96.21%) was taken from the central bank.

Meanwhile, customers have been withdrawing more money from the banking system rather than investing in saving certificates.

According to the latest data of the Bangladesh Bank, in the July-February period of FY23, customers invested Tk55,862 crore in saving certificates, while they withdrew Tk59,372 crore. That means people withdrew Tk3,510 crore more than they deposited.

A senior Bangladesh Bank official told TBS that the more the money circulation increases, the higher the inflation will be. The reason for Bangladesh Bank's advice to increase the government's loan from non-banking sources is that this money will go from the common man's pocket to the government, which will reduce money circulation and at the same time reduce inflation.

He said, "Government borrowings from scheduled banks do not increase money circulation. Borrowing from the central bank increases money circulation, which in turn increases inflation. So, we emphasised that the authorities reduce borrowing from the central bank."

Regarding the decrease in investment in saving certificates, he said, "The government has reduced the interest rate for them. Besides, a tax receipt has to be submitted to buy these certificates, so investment here has decreased."

The government has set a target of borrowing TK106,334 crore from banking sources to meet the budget deficit for FY23.

Meanwhile, the government repaid more loans taken from the scheduled banks than it borrowed from them in the current fiscal year. As of December 2022, the government paid about Tk20,000 crore to the scheduled banks in FY23, said sources at the Bangladesh Bank.

The liquidity situation in the scheduled banks is rather normal. Banks bought government treasury bills and bonds worth Tk5,722 crore in January, Tk7,844 crore in February, and Tk6,024 crore in March.

On condition of anonymity, the managing director of a private bank told TBS, "Due to the liquidity crisis in the banking sector, from July to December last year, the government repaid more loans than it borrowed from banks."

The government has set a target of Tk2.56 lakh crore for the implementation of the Annual Development Programme in FY23. From July 2022 to February 2023, it implemented project work involving Tk82,000 crore.