The government’s net borrowing from the banking system skyrocketed to Tk 43,411.13 crore in four and a half months of the fiscal year 2019-20 with more than 85 per cent of its annual development programme left unimplemented.
According to Bangladesh Bank data, the government’s outstanding borrowing from the banking sector increased to Tk 1,51,506.84 crore on November 17 this year from Tk 1,08,095.7 crore on June 30 this year.
The government’s borrowing from the banking system was only Tk 2,891.70 crore in the first five months of the last fiscal year 2018-19.
Economists said that the government’s net borrowing from the banking sector may exceed Tk one lakh crore in the current fiscal year as it would go for large bank borrowings in the second half of the year when the implementation of development projects would gather momentum.
The government has implemented only 14.25 per cent of its development projects in the July-October period of the current fiscal year. It has formulated a Tk 2,15,114 crore development programme for the FY20.
The economists mentioned the slowdown in the sale of national savings certificates, another major source of the government’s domestic borrowing, and the stagnancy in the revenue collection by the National Board of Revenue as the reasons for the sharp rise in the borrowing from the banking sector.
As latest data shows, the NBR had a shortfall of Tk 14,907 crore in its revenue collection in the first quarter of FY20.
The board’s revenue collection grew by only 2.6 per cent in July-September, one of the lowest in the decade.
Besides, the net NSC sales slumped by 64.97 per cent or Tk 8,713.95 crore year-on-year in July-September of the current fiscal year because of the tightened sales process and the hike in tax on interest.
The net sales of NSCs dropped to Tk 4,698.07 crore in July-September of the FY20 against Tk 13,412.02 crore during the same period of the FY19.
Former caretaker government adviser AB Mirza Azizul Islam recently told New Age that high expenditure pressure for financing mega projects and salary payment against the slow pace of NSC sale and the dismal growth in revenue collection have forced the government to borrow from the banking sector in large volumes.
The continuation of such high borrowing from the banking sector would ultimately hamper the credit flow to the private sector, which has been facing a credit crunch for the last 10 years, hitting the achievement of desired economic growth, he said.
Under the circumstances, the government should prioritise approval of development projects along with keeping a sharp eye on ensuring effective fund use and timely project completion, said Mirza Aziz.
Policy Research Institute executive director Ahsan H Mansur told this daily that the poor state of revenue collection and slow NSC sale were behindthe high government borrowing from the banking system.
‘The government has no other option than borrowing from the banking system for budget implementation,’ he said.
The expenditure pressure on the government would increase further in the coming months as it has implemented only about 14.25 per cent of the ADP in the first four months of the FY20, he said, adding that the government’s borrowing would reach Tk 1,00,000 crore by June, 2020.
Mansur, however, was sceptical about the government’s ability to implement the budget even after huge borrowing from banks.
Asked whether there is any remedy to the problem, he said: ‘For now, the government has no alternative.’
In the budget for FY20, the revenue collection target was set at Tk 3,77,810 crore, leaving a deficit of Tk 1,45,380 crore.
To meet the total revenue collection target, the government set Tk 3,25,600 crore target for the NBR, up by 16.29 per cent or Tk 45,600 crore from the revised Tk 2,80,000 crore target set for the fiscal year 2018-19.
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 ones.
Under the banking sector borrowing target, 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 for short terms.
Apart from the bank borrowing, Tk 29,999 crore was targeted to be borrowed from 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 borrowing, the government repaid Tk 2,851.2 crore against its borrowing from the banking sector in the FY18. In the FY17, the bank loan repayment by the government was Tk 18,405 crore.
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