Govt to rely more on bank borrowing as target raised to Tk1 lakh crore for FY26
The government intends to borrow Tk96,000 crore from foreign sources in FY26, which is down from the revised target of Tk1.04 lakh crore in FY25
The government has set a bank borrowing target of Tk1.04 lakh crore for the upcoming fiscal 2025-26, marking a 5% increase from the revised target of Tk99,000 crore for the current fiscal year.
The proposed borrowing will account for 47% of the total budget deficit of Tk2.21 lakh crore, as outlined in the national budget presented by Finance Adviser Salehuddin Ahmed today (2 June).
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, told The Business Standard, "Loan demand in the private sector remains quite low, so banks should be able to support the government if needed. However, the government's debt servicing capacity is not strong."
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"While interest payments are rising, the government is also taking on new loans to repay old ones. If revenue collection is not prioritised now, the central bank may eventually be forced to print money," he added.
He further explained, "In other words, instead of relying heavily on bank borrowing, the government should focus on revenue reforms to reduce pressure on the banking sector."
In FY25, bank borrowing accounted for 44% of the budget deficit. However, as of 12 May, net government borrowing had reached Tk56,116 crore – 56.68% of the full-year target.
If the current trend continues, net borrowing is expected to remain within the target by the end of FY25.
In the upcoming fiscal year, the government plans to rely more on domestic bank borrowing to finance the budget deficit while reducing its dependence on foreign loans.
According to the budget document, the government aims to borrow Tk96,000 crore from foreign sources in FY26, down from the revised target of Tk1,04,600 crore in FY25.
The government has also lowered its borrowing target from national savings certificates, which are considered a more expensive source of funds.
For FY26, the target for borrowing through savings certificates has been set at Tk12,500 crore – 10.7% lower than the revised target of Tk14,000 crore in FY25.
