Govt borrows Tk16,601cr from banks in first two months of FY27
Only Tk463cr borrowed during same time last year
Highlights:
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Borrowing surged from Tk463 crore during the same period last year.
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Weak revenue collection and higher spending increased government financing needs.
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Government aims to borrow Tk1.12 lakh crore from banks.
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Reserve money growth reached 17.86% in August, raising inflation concerns.
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VAT collection fell 20%, while future credit growth risks inflation.
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The government borrowed Tk16,601 crore from scheduled banks in the first two months of the current fiscal year to finance the budget deficit, compared with just Tk463 crore borrowed during the same period last year, according to a monthly government borrowing report of Bangladesh Bank.
Economists attribute the sharp rise in borrowing at the start of FY27 to weaker revenue collection and higher government spending.
The government has set a target to borrow Tk1.12 lakh crore from the banking system in FY27. Of this, already Tk16,601 crore has been borrowed.
Meanwhile, the government's net borrowing stood at around Tk13,000 crore at the end of the first two months of FY27. In the same period of FY26, the government had instead made a net repayment of Tk9,792 crore.
Economists said government revenue collection is usually low at the beginning of a fiscal year, while development and other public spending often rises during the period.
At the same time, weak private-sector credit growth has left banks with excess liquidity, prompting them to increase investment in treasury bills and bonds. This has also helped push up government borrowing from banks, they said.
Higher fuel costs have increased subsidy requirements, while implementation of the new pay scale has also added to the government's financing needs.
According to data, the government's outstanding borrowing stood at around Tk7 lakh crore at the end of August. Of this, Tk6.08 lakh crore was owed to scheduled banks, while borrowing from the central bank was Tk90,000 crore.
The government also borrowed Tk1,031 crore from non-bank sources, including non-bank financial institutions, insurance companies and individual depositors.
Arief Hossain Khan, executive director of Bangladesh Bank, said borrowing from banks or the public to finance budget deficits was a normal process as the government needs funds to implement development activities.
Reserve money growth raises inflation concerns
The rise in government borrowing comes alongside a sharp increase in reserve money, raising concerns over future inflationary pressure.
Bangladesh Bank data shows reserve money growth was negative 0.12% in June last year. It then rose to 2.52% in July, 3.47% in September and 9.23% in December 2025, before reaching 13.35% in February, 14.39% in April, 15.25% in June and 17.86% in August this year.
Reserve money refers to cash circulating in the economy and commercial banks' deposits with Bangladesh Bank. It can generate broader money growth through bank lending and deposit creation.
A central bank official said they were maintaining a contractionary monetary policy, including a high policy rate, but money was still entering the economy through various channels.
Bangladesh Bank Executive Director Dr Md Ezazul Islam said the central bank had purchased more than $6 billion since 13 July last year to stabilise the exchange rate, injecting a significant amount of taka into the market.
He said the impact on inflation had so far been limited because private-sector credit demand remained weak. However, stronger private-sector borrowing in the future could create greater inflationary pressure.
Meanwhile, NBR data show VAT collection fell by around 20% in July and August compared with the same period last year.
