Govt targets external financing of Tk1.2tn and Tk1.3tn over next two fiscals

To promote a robust domestic debt market, the Bangladesh government is strategising to increase its share of marketable securities in the coming years.

According to a recent Finance Ministry document, the administration is also committed to continued issuance of Islamic securities Sukuks but has currently shelved plans for Eurobond issuances on the global market.

As fiscal deficits loom, with projections showing a deficit of Tk2792.3 billion (Tk2.79 lakh crore) for FY2024-25 and Tk3170.7 billion (Tk3.17 lakh crore) for FY2025-26—equating to 5% of GDP each year—the government underscores the need for strategic domestic borrowing.

The focus remains on minimising borrowing costs through traditional external creditors, which are preferred, the document detailed.

The strategy for addressing deficits includes an ambitious target of collecting Tk 1200.3 billion (Tk1.2 lakh crore) from external sources in FY2024-25 and Tk1306.4 billion (Tk1.3 lakh crore) in FY2025-26, each constituting 2.1% of GDP.

Domestic sourcing is expected to contribute significantly more, with plans to collect Tk1677.7 billion and Tk1864.4 billion (Tk1.86 lakh crore) over the same periods, representing 2.9% of GDP.

Significantly, the banking sector is anticipated to contribute Tk1384.9 billion (Tk1.38 lakh crore) in FY2024-25 and Tk1547.3 billion (Tk1.55 lakh crore) in FY2025-26. In comparison, non-banking sectors will contribute Tk292.8 billion (Tk29,280 crore) and Tk317.1 billion (Tk31,710 crore) respectively.

Savings certificates will add Tk191.4 billion (Tk19,140 crore) and Tk190.3 billion (Tk19,030 crore), while other sources are projected to contribute over Tk100 billion annually.

The government maintains a prudent deficit financing policy to stave off debt distress, keeping the deficit steady at around 5% of GDP and maintaining a stable debt level at around 33% of GDP in recent years, the finance ministry document explained.

This balanced approach aims to mitigate the risks associated with deficit financing while prioritizing sustainable economic development.

In terms of the medium-term outlook, the government expects domestic borrowing to remain stable at 2.9% of GDP.

However, the approach to marketable securities will see a significant nominal increase, with a planned reduction in the reliance on higher-cost National Savings Certificate instruments, which will see a gradual decrease in their contribution to the financing mix.

External financing is also projected to increase nominally between FY2023-24 and FY2025-26, driven by greater disbursement for large projects and increased budget support, though dependent on the pace of project implementation.

Bangladesh has received considerable budget support from external sources in recent years, a trend expected to continue in the medium term, the document stated, highlighting the ongoing commitment to leveraging both domestic and international financial strategies to meet fiscal challenges.