As of November 17, the government borrowed Tk43,411 crore or 92% of its full-year target of Tk47,364 crore from the banking sector, according to Bangladesh Bank data
The economy is going to get into a quagmire as shortfall in revenue collection and excessive bank borrowing are set to thwart its growth target, economists fear.
Continuing fall in export earnings has aggravated the already sagging economy, they add.
Wobbly stock market, low confidence of private sector and negative import growth that signals poor factory activities put a dent on the macro economy that suggests a bleak outlook for economic expansion.
Observers say things are going beyond the control of the government amid poor performance of the economy and soaring prices of essential food items.
They foresee that the private sector will be suffering from a crowding out effect if the government does not improve its revenue collection.
“The government may not be able to attain growth target as all economic indicators are negative. The revenue collection is far behind the target and sale of government saving certificate is also low. That is why the government is borrowing from banks, which is not a good sign for the economy,” former finance adviser to a caretaker government Mirza Azizul Islam told Dhaka Tribune on Monday.
He said the government needed to focus on revenue collection to improve the situation.
As of November 17, the government borrowed Tk43,411 crore or 92% of its full-year target of Tk47,364 crore from the banking sector, according to Bangladesh Bank data.
The National Board of Revenue (NBR) faced a revenue shortfall of Tk20,220.75 crore during the first four months (July-October) of the current fiscal year, according to the latest data of the revenue board.
The government has set a target to collect Tk325,500 crore in tax revenues for the entire fiscal year starting on July 1.
Besides, the net national saving certificate (NSC) sales slumped by 64.97% or Tk8,713.95 crore year-on-year in July-September of the current fiscal year because of the tightened sale process and the hike in tax on interest.
The net sales of NSCs dropped to Tk4,698.07 crore in July-September of the FY20 against Tk13,412.02 crore during the same period of the FY19.
The export earnings of the country also declined 6.82% to $ 12.71 billion in July-October period compared with the same period of the previous year, according to Export Promotion Bureau data.
The Centre for Policy Dialogue (CPD) Distinguished Fellow Mustafizur Rahman said the overall economic outlook was gloomy as major indicators were on a negative trend.
“The revenue shortfall of the government is pushing it to borrow from the banks to meet its expenditure. Now the private sector growth is also slow, so the fund crisis in the sector is not visible right now. But soon the crowding out effect will become evident in the economy,” he told Dhaka Tribune.
The Implementation Monitoring & Evaluation Division data show that the government has implemented only 14.25% of its development projects in the July-October period of the current fiscal year against a Tk215,114 crore development program for the FY20.
“The ADP implementation rate shows the government bank borrowing is mainly spent to meet its current expenditure like salaries, pension and payment for other operations. As the government cannot right now cut these expenditures, it needs to curtail its development expenditure,” Policy Research Institute of Bangladesh Executive Director Ahsan H Mansur told Dhaka Tribune.
The private sector was already facing fund crisis due to government excessive bank borrowing, he mentioned.
“The government needs to admit that there is a problem in the economy and then try to solve it. It should expand business scope for the private sector and cut the development expenditure immediately,” he added.
The Centre for Policy Dialogue (CPD) in its economic review last month said the country’s economy was the weakest in the last 10 years.
The country’s leading think-tank also said the government’s repeated recapitalization to the state-owned banks and bailing out private bank were setting bad precedence and encouraging irregularities in the sector.
The stock market was struggling under vested quarters’ influences and listed companies were failing to give dividends, leaving the general investors to worry, it added.
The DSEX, key index of Dhaka Stock Exchange (DSE), hit as low as 4,533.75 points yesterday which was the lowest in 39 months. The last time the index hit its lowest was on August 31 of 2016, when it was down to 4,526 points.
Finance Minister AHM Mustafa Kamal last month said the government would miss the revenue target of July-December period as the NBR failed to procure electronic fiscal devices (EFDs) to facilitate enforcement of the VAT law.
The minister, however, claimed that the loss in tax revenue mobilization in July-December period would be covered by accelerating efforts in the next six months to achieve the fiscal's target.
According to BB data, the soaring non-perfuming loans are at 11.69% in the country.
The Asian Development Bank (ADB) recently recommends merging or divesting the country’s state-owned commercial banks (SCBs) in an effort to bring down the soaring non-performing loans (NPL) in the banking sector.
Among the major economic indicators only remittance showed positive growth as expatriate Bangladeshis sent $7.71billion in the first five months of FY 2019-20, which is 22.67% higher than same period of last year.