• Tuesday, Oct 26, 2021
  • Last Update : 12:25 pm

Government debt to banks go up as development projects regain momentum

  • Published at 08:29 pm September 9th, 2021
Metro Rail
Bangladesh's first-ever metro rail train during its first formal trial run in Dhaka's Mirpur area on Sunday, August 29, 2021 Mehedi Hasan/Dhaka Tribune

The amount is 12.2% higher compared to the same period of FY21

The government's bank borrowing has started increasing again in the current 2021-22 fiscal year as development projects that were halted due to Covid-19 have regained momentum.

According to the Bangladesh Bank, the government borrowed Tk15,710.86 crore from banks in the first two months of the current fiscal year, and repaid loans amounting to Tk8,191 crore to the central bank.

The net debt for this fiscal year now stands at Tk7,519 crore, which is 9.83% of the government's target.

The government’s total borrowing since independence stood at Tk183,865 crore at the end of August last year, which has now reached Tk209,436 crore.

Borrowing from the banking sector went up by 12.20% during the first two months of FY22 compared to the same period last fiscal year, following the gradual improvement of the Covid-19 situation across the country.

According to the officials of the Ministry of Finance, the bank borrowing of the government is increasing in the current financial year because of the implementation of development projects, which was stopped due to the pandemic.

The amount of borrowing from the banks always increases at the beginning of the financial year as the projects do not bear fruit at the initial stages. 

After receiving funds for various projects and allocations, the needs are met from there and the bank loans gradually get repaid.

Finance Ministry officials also added that the government currently needs a lot of cash as a result of the huge progress in various projects including the Padma Bridge, LNG Terminal and Metro Rail ones.

Economist and former caretaker government's finance adviser AB Mirza Azizul Islam says there is nothing to worry about the government's bank borrowing dependence.

He told the Dhaka Tribune that there had been an increase in the government's bank loan dependency a couple of years ago, which decreased during the beginning of the pandemic last year.

One of the reasons behind this was the decline in various development activities of the government.

Private banks are able to benefit from the government by lending at a certain interest rate, without having to worry about the loan being defaulted.

Bangladesh Bank Executive Director and Spokesperson Serajul Islam said: “The fact that the government has increased its borrowing from the banking sector to cover its deficit is a positive development.

“The government will use those loans for implementing development projects, which in turn will boost employment opportunities in the country and grow our GDP,” he added.

Analysis of the data of Bangladesh Bank shows that in the last fiscal year, the government’s net borrowing of Tk26,000 crore was far below the target. 

It had set Tk84,980 crore as the target in the initial budget for that fiscal year but later dropped it to Tk79,749 crore in the revised budget as the sales of saving certificates had exceeded expectations.

The government had borrowed Tk66,907 crore from banks in FY20 and Tk18,269 crore in FY19. 

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