The government’s net borrowing from the banking system surged with the figure standing at Tk 33,586.94 crore in just four months (July-October) of the current fiscal year 2019-20 against Tk 535.90 crore in the same period of FY 2018-19.
Economists said that a slowdown in sales of national savings certificates, another major source of the government’s domestic borrowing, and the stagnancy in revenue collection by the National Board of Revenue were the reasons for the sharp rise in the government’s borrowing from the banking sector.
The borrowing might reach Tk 1,00,000 crore in FY20, leaving the government in a challenging situation to meet budget deficit, they said.
As per the latest data, the NBR faced a shortfall of Tk 14,907 crore in revenue collection in the first quarter of FY20.
The NBR’s revenue collection grew only by 2.6 per cent in July-September, one of the lowest in decade.
Besides, the net sales of NSCs dropped by 59.59 per cent year-on-year in the July-August period of the current fiscal year because of tightening of sales process and hike in tax on interest.
As per the Bangladesh Bank data, the government’s outstanding borrowing from the banking sector increased to Tk 1,41,682.64 crore on October 30 this year from Tk 1,08,095.7 crore on June 30 this year.
Economists also cautioned that the government’s borrowing in the current fiscal might reach Tk 1,00,000 crore if the government continued borrowing at the same rate to meet budget deficit.
Former interim government adviser AB Mirza Azizul Islam told New Age, ‘High expenditure pressure for financing mega projects and salary payment against the slow pace of the sales of NSCs and the dismal growth in revenue collection have forced the government to borrow from the banking sector in large volume.’
Continuation of such high borrowing from the banking sector would ultimately hamper credit flow to the private sector, which has already been suffering for last 10 years, thus hampering the achievement of desired economic growth, he said.
Under the circumstances, the government should set priority in approving development projects along with keeping vigilant in ensuring effective use of fund and timely project completion, said Mirza Aziz.
Policy Research Institute executive director Ahsan H Mansur told New Age, ‘Significant deficit in revenue collection and slow sales of NSCs were the reasons for the high government borrowing from the banking system.’
Expenditure pressure on the government would increase further in the coming months of the current fiscal year, he said, adding that the government’s borrowing might reach Tk 1,00,000 crore if the current trend continued.
The private sector would get less scope for availing credit from the banks thus resulting in obstacles to the trade and business, said Mansur, also the chairman of BRAC Bank.
Asked whether there was any remedy to the problem, he said, ‘For now, the government has no alternative but minimising project cost.’
Taking the overall situation into consideration, he cautioned that the government would have to go through tough time in the coming days as expenditure pressure would increase further.
In the budget for FY20, the revenue collection target was set at Tk 3,77,810 crore, leaving deficit at Tk 1,45,380 crore.
Of the revenue collection target, the government set Tk 3,25,600 crore target for the NBR, up 16.29 per cent or Tk 45,600 crore on the revised Tk 2,80,000 crore target it had set from the fiscal year 2018-2019.
For deficit financing, the government has planned to borrow Tk 63,848 crore from overseas sources and the rest Tk 77,363 crore from domestic sources.
Of the borrowing target from the banking sector, the government has planned to borrow Tk 47,364 crore from the banking sector — Tk 28,094 crore as long-term debt and Tk 19,270 crore as short-term debt.
Apart from the bank borrowing, another Tk 29,999 crore would be borrowed by the government from the domestic sources, especially by selling national savings certificates.
The government’s net borrowing from the banking sector was Tk 19,800.9 crore in the entire fiscal year of 2018-2019.
Instead of taking money, the government repaid Tk 2,851.2 crore against its borrowing from the banking sector in FY18. In FY17, the bank loan repayment by the government was Tk 18,405 crore.
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