Govt bank borrowing jumps Tk33,542cr in just two weeks

The government's borrowing from the banking sector rose sharply by Tk33,542 crore in a span of just 14 days, driven by election-related expenditure and fund injections to support the capital of five banks, according to a recent Bangladesh Bank report.

Data from the central bank show that government borrowing remained minimal from 1 July to 24 November of the current fiscal year, largely because development spending was virtually stalled. However, the situation shifted within the following two weeks.

By 8 December of FY2025-26, the government's total borrowing from the banking sector had risen to Tk45,239 crore, according to Bangladesh Bank data. 

Highlights: TBS

This compares with net borrowing of just Tk11,697 crore during the 1 July-24 November period of the same fiscal year, highlighting the sharp increase.

According to central bank figures, the government has set a target of Tk1.04 lakh crore in domestic borrowing for the current fiscal year. Now, with the latest borrowing, nearly 43% of that target has been reached.

Why the sudden rise

Bankers said government borrowing typically increases in the second quarter of a fiscal year. However, they noted that the surge in the two weeks was mainly due to the release of funds as subsidies in the process of merging five Shariah-based banks, alongside spending related to the election period.

They added that one of the main reasons for low borrowing in the first five months was the near standstill in development expenditure, which kept government financing needs limited during that period.

Central bank data show that the government's net borrowing till 8 December included Tk23,227 crore from scheduled banks and Tk22,011 crore from Bangladesh Bank.

Just a month earlier, up to 24 November from 1 July, net borrowing from scheduled banks stood at only Tk9,704 crore, while net borrowing from the central bank was Tk1,901 crore.

Auction calendar changed at short notice

A senior Bangladesh Bank official said the government held two additional auctions in December outside its scheduled borrowing calendar.

"Through two extra auctions of 91-day treasury bills and five-year treasury bonds, around Tk10,000 crore was raised from the market," the official said.

According to Bangladesh Bank data, on 10 December, the government raised Tk5,000 crore through a 91-day treasury bill auction held outside the pre-announced calendar. Earlier, towards the end of November, another Tk5,000 crore was raised through a five-year treasury bond auction, which carried an interest rate of 10.55%.

"This brings the total off-calendar borrowing for the October-December quarter to Tk10,000 crore," a senior Bangladesh Bank official told The Business Standard, confirming the development.

He said the off-calendar borrowing was likely linked to the Tk20,000 crore capital injection into Sammilito Islami Bank, which created a short-term liquidity requirement. "Treasury bills and bonds are being used to manage these funds," the official said.

Supporting this view, the treasury head of a private bank said that with most government projects currently on hold, the move was mainly a fund-management measure.

Another Bangladesh Bank official said the central bank was closely monitoring the situation to ensure that the increased borrowing does not fuel inflation.

Now, following this development, the government's total borrowing since 24 November will increase more.

Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said it is normal for the government to channel funds to one area while borrowing from another.

"However, the scale of borrowing from the banking sector should not create distortions that could disadvantage private borrowers," he said. "As demand for private-sector loans rises, care must be taken to ensure fair access.