Govt's borrowing from savings tools lower than repayment
Bankers say the government has reduced development spending to control inflation. As a result, the government is paying more than it borrows from this sector. The government is also borrowing from banks and paying it back to the central bank
The government's net borrowing from savings certificates declined by Tk1,264 crore in the September quarter, indicating that it repaid more than it borrowed during the period.
According to Bangladesh Bank data, the government took Tk21,656 crore in loans in the first three months of the current fiscal 2023-24. However, it repaid Tk22,921 crore in principal loans during the same period.
Bankers say the government has reduced development spending to control inflation. As a result, the government is paying more than it borrows from this sector. The government is also borrowing from banks and paying it back to the central bank.
They say the government and the central bank's main goal at this time is to control inflation. As a result, the government is taking steps to reduce money supply in any way possible. This will reduce inflation as the amount of money in people's hands decreases.
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In the September quarter of FY23, the government's net borrowing from savings certificates was Tk330 crore.
During the period, the government borrowed Tk21,511 crore from savings certificates and repaid Tk21,180 crore in principal.
Net borrowing from banking sector slows
As of 25 October 2023, the government's net borrowing from the banking sector since 1 July stands at Tk105 crore in the negative.
During the period the government borrowed Tk29,048 from scheduled banks and repaid Tk29,154 crore to the central bank. In other words, the government's current borrowing to meet the budget deficit is negative.
The government set a target of borrowing Tk1.32 lakh crore from the banking sector to meet the deficit in FY24.
The government's net borrowing in the first four months of FY23 was Tk22,348 crore after it had borrowed Tk25,676 crore from the central bank during the period.
A managing director of a private bank told The Business Standard that the government's borrowed money is not being spent on the development budget as it is focusing on repayment of earlier loans to reduce liquidity in the market and controlling inflation.
"The government is now offering interest rates of around 10% on treasury bills and bonds from banks. The interest rate was around 7 to 7.5% in July-August. In other words, the government wants to raise money at a higher rate from the market and pay it back to the central bank," he said.
ADP spending decreases
The government's spending in the Annual Development Plan (ADP) in the September quarter dropped significantly.
During the period, the government spent Tk20,609 crore in the ADP, which was 7.50% of the total annual plan. In the similar period of the previous fiscal year, the ADP spending was Tk21,895 crore or 8.55% of the target.
