Zarif Mahmud: At the end of the current financial year, the government has increased borrowing from the banking sector at an unusual rate. Tk 82056 crore has been taken in 10 months from July to April, which is 73.52 percent of the target set in the budget. About 80 percent of the loan was provided by Bangladesh Bank. Of this loan, Tk 74,393 crore was taken from the central bank and the net loan taken from commercial banks was Tk 7,663 crore.
Of this loan, Tk 30,000 crore was taken in the month of April alone, which is the highest in a single month in the current fiscal year 2022-2023. The total net bank debt of the government in the previous month till March was Tk 52,360 crores.
To meet the budget deficit, the government borrows from the banking sector. Most of this loan is spent on annual development programmes. Those concerned are expecting that the loan amount will increase in the last 2 months of the financial year. Because the government has to increase spending to implement development and revenue programs. According to the analysts, the amount of loan taken by the government from the banking sector may exceed the target of Tk 1 lakh 6 thousand 334 crore in the current financial year.
According to the Central Bank’s updated report, the government borrowed Tk 17,770 crore in March, and Tk 6,803 crore in February. Earlier, during July-April of 2021-22 financial year, the government took a loan of Tk 3409 crore from the bank.
Opinions of stakeholders
Regarding the increase in government debt, Bangladesh Bank spokesperson and executive director Mejbahul Haque said that the amount of loan taken by the government from the bank increases and decreases again. If necessary, it will be adjusted again.
It is known that Bangladesh Bank is cautious about inflation before the government’s bank debt increases towards the end of the financial year. It had suggested borrowing from alternative sources last February to control the money supply.
According to Bangladesh Bank’s report prepared on the basis of the government’s bank loan data in February last year, the government’s bank loan has increased in the same period of the current financial year compared to the last fiscal year 2021-22. On the other hand, the rate of borrowing from non-bank sources is decreasing due to the decline in net sales of national savings bonds. This trend is contributing to increasing inflation. Despite the advice to shift to alternative sources, the government’s borrowing from the central bank is increasing and the original alternative savings bond has to be repaid rather than sold.
Central bank officials are talking about taking loans from non-bank financial institutions alongside the National Savings Certificate (NSC). However, after the International Monetary Fund (IMF) sanctioned a $4.7 billion loan to Bangladesh, the country report asked to gradually reduce NSC dependence. The government has also agreed to accept many suggestions from the financial and banking sector, including a set of reform proposals from the global financial institutions.
In this, the government does not have much opportunity to reduce loans from banks and increase them from savings bonds. The government has taken more loans against the treasury bills and bonds of Bangladesh Bank to meet the demand of cash without getting it from other sources.
According to the report of the central bank, the net loan taken from the central bank during July-April was Tk 74,393 crores. In the same period of the previous financial year which was Tk 7,0162 crores. According to this, borrowing from the central bank has increased by Tk 67,230 crore or 938.67 percent in one year. At the end of last April, the government’s debt status with the central bank stood at Tk 1 lakh 34 thousand 386 crores.
On the other hand, the government has taken a net loan of Tk 7,663 crore from commercial banks in the last 10 months, compared to Tk 26,846 crore in the same period of the last financial year.
At the end of last April, the bank loan status of the government stood at Tk 3 lakh 56 thousand 469 crores, of which Tk 2 lakh 21 thousand 983 crores of commercial banks. At the end of 2022 which was about Tk 3 lakh 2 thousand 435 crores and at the end of December 2021 it was Tk 2 lakh 21 thousand 243 crores.
The government had set a target of taking a loan of Tk 146 thousand 335 crore from internal sources in the current financial year to meet the budget deficit. Later it was reduced to Tk 1 lakh 41 thousand 608 crore. Incidentally, when the central bank lends to the government by printing additional currency, it is called high-powered currency. This can lead to high inflation.
Ahsan H Mansoor, executive director of the Policy Research Institute of Bangladesh, said borrowing from the central bank means money is out of the market, which has an adverse effect on inflation and the balance of payments (BOP). Inflation eased slightly to 9.24 percent in April as the consumer price index rose to a seven-month high of 9.33 percent in March. It was 6.17 percent in February last year.
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