The government’s borrowing from the country ‘s banking system through treasure bills and bonds for the first time exceeded Tk 85,000 crore in the just concluded fiscal year 2019-2020 due mainly to gloomy revenue collection and plunge in sales of national savings certificates.
According to Bangladesh Bank data, the government’s borrowing against treasury bills and bonds increased to Tk 78,731 crore in the fiscal year.
Of the amount, the banking sector contributed around 80 per cent and the rest 20 per cent came from non-bank financial institutions, insurance companies and individuals, an official of the central bank said.
Besides, the central bank provided another Tk 6,500 crore, taking the government’s total borrowing from the internal sources (excluding NSCs) to Tk 85,231 crore in FY20.
The borrowing is Tk 2,810 crore higher than the government’s final bank borrowing target of Tk 82,421 crore set for the just concluded fiscal year.
In the budget for FY20, the government initially projected to borrow Tk 47,364 crore from the banking sector. The target was later revised to Tk 72,953 crore.
As the revenue collection was deteriorating amid the coronavirus outbreak in the country, the government continued to increase its bank borrowing target.
It was the halt in almost all sorts of business activities during the pandemic-induced shutdown between March 29 and May 30 that resulted in a fall in revenue collection by the National Board of Revenue in FY20 for the first time.
Experts and bankers said that the volume of borrowing from the banking system by the government would be determined by the pace of recovery from the pandemic.
If the situation prolongs, it would be difficult for the government to limit its borrowing within its target and a higher borrowing would create obstacle for the private sector to get credit, resulting in a slower economic acceleration, they said.
‘The government borrowed heavily from the banking sector due mainly to a huge revenue shortfall and it had no alternative but to borrow,’ Policy Research Institute executive director Ahsan H Mansur told New Age.
The borrowing could have been higher if the implementation of annual development programme reached to a satisfactory level, he said.
Because of the government’s heavy borrowing, a major portion of the revenue in the current fiscal year would go for the interest payment, he said.
As the government has kept its bank borrowing target high, it would not be possible for the banks to take the private sector credit to a satisfactory level considering the existing deposit growth, Ahsan said.
‘How could 8.2 per cent GDP growth target be attained if adequate credit for the private sector is not ensured?’ he questioned.
The BB official said that there was no scope for the government other than borrowing from the banking sector to bear the regular expenses along with running different assistance programmes due to a plunge in revenue collection.
In FY20, the revenue board managed to collect Tk 2,15,400 crore in FY20, down 3.79 per cent, or Tk 8,492 crore, from Tk 2,23,892 crore collected in FY19.
Revenue collection also fell Tk 85,100 crore short of the revised target set at Tk 3,00,500 crore for FY20.
Apart from the revenue, tighter regulations resulted in lower public attraction to NSCs, contributing to the government’s higher bank borrowing.
The net sales of NSCs turned negative Tk 621 crore in April this year against Tk 3,741.28 crore in the same month last year.
The government’s net borrowing from national savings schemes stood at
Tk 10,580 crore, far lower than the government’s initial budgetary target.
For this fiscal year (2020-2021), the government has set its bank borrowing target at Tk 84,983 crore to meet part of its Tk 1.9 lakh crore budget deficit.
It also planned to source another Tk 25,000 crore from savings certificates and the other non-bank sources.
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