The government’s borrowing from the banking sector turned negative in the July-February period of the current fiscal year 2020-2021 amid heavy sales of national savings certificates and low spending on implementation of the annual development programme amid the COVID-19 outbreak.
Bangladesh Bank data showed that the government repaid Tk 11,940.23 crore in bank loans in the eight months of FY21.
For FY21, the government’s budgetary projection was to borrow Tk 84,980 crore from the banking sector for deficit financing.
The government’s record Tk 80,238 crore borrowing in the FY 2019-20 was the reason for setting high bank borrowing target, officials said.
The government also anticipated that NSC sales, another source for the government to borrow fund, would remain low, they said.
In FY20, the net sales of NSC dropped to Tk 14,428 crore from Tk 49,939 crore in FY19.
National Savings Directorate showed that the net sales of NSCs reached Tk 25,702.17 crore in July-January of the current fiscal year as investors found no other high-yielding investment product than the NSC.
NSC sales in the first seven months of FY21 were higher by Tk 5,702.17 crore than the government’s budgetary target of Tk 20,000 crore.
With the government’s repayment in July-February of FY21, the government’s outstanding bank borrowing dropped to Tk 1,65,882.78 crore at the end of February 28, 2021 from Tk 1,77,823.01 crore at the end of June, 2020.
Scheduled banks issued Tk 31,093 crore in credit to the government in the July-February period.
On the other hand, the central bank received Tk 43,033.75 crore from the government that lowered the BB’s lending to the government to Tk 1,319.74 crore in February 2021 from Tk 44,353.5 crore in June 2020.
Even after the payment, the government has Tk 27,182.42 crore in deposit in its accounts at the end of February 2021 while its deposit was only Tk 33.2 crore at the end of FY20.
Banks are also suffering from excess liquidity due mainly to poor credit growth.
As of December 2020, banks were having Tk 2.04 lakh crore in excess liquidity.
Asked about the reason for the decline in the government’s bank borrowing, BB’s monetary policy department executive director Md Habibur Rahman told New Age, ‘It has happened due mainly to heavy buying of national savings certificates by people in the current fiscal year.’
As the government is holding excess liquidity in its hands, the government repaid its bank loans, Habibur said.
He, however, said that the situation might change in the coming days as the government’s spending usually surges in the closing quarter of a fiscal year.
The implementation of annual development programme in the July-February period of FY21 dropped to a decade low.
Implementation Monitoring and Evaluation Division data showed that the government agencies were able to spend just 33.83 per cent of the allocation during the period.
The government have significant amount of deposit in its accounts even though the revenue collection situation is still remains dissatisfying.
The National Board of Revenue has recently downsized the revenue collection target to Tk 3.01 lakh crore for FY21 from the original target of Tk 3.30 lakh crore.
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