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Dhaka Tribune

Govt targets external financing of 120,030C, 130,640C over next two fiscals

The focus remains on minimizing borrowing costs through traditional external creditors, which are preferred

Update : 14 May 2024, 06:21 PM

To promote a robust domestic debt market, the government is strategizing to increase its share of marketable securities in the coming years.

According to a recent Finance Ministry document, the administration is also committed to continued issuance of Islamic securities Sukuks but has currently shelved plans for Eurobond issuances on the global market.

As fiscal deficits loom, with projections showing a deficit of Tk279,230 crore for FY25 and Tk317,070 crore for FY26, equating to 5% of GDP each year, the government underscores the need for strategic domestic borrowing.

The focus remains on minimizing borrowing costs through traditional external creditors, which are preferred, the document detailed.

The strategy for addressing deficits includes an ambitious target of collecting Tk120,030 crore from external sources in FY25 and Tk130,640 crore in FY26, each constituting 2.1% of GDP.

Domestic sourcing is expected to contribute significantly more, with plans to collect Tk167,770 crore and Tk186,440 crore over the same periods, representing 2.9% of GDP.

Significantly, the banking sector is anticipated to contribute Tk138,490 crore in FY25 and Tk154,730 crore in FY26.

In comparison, non-banking sectors will contribute Tk29,280 crore and Tk31,710 crore respectively.

Savings certificates will add Tk19,140 crore and Tk19,030 crore, while other sources are projected to contribute over Tk10,000 crore annually.

The government maintains a prudent deficit financing policy to stave off debt distress, keeping the deficit steady at around 5% of GDP and maintaining a stable debt level at around 33% of GDP in recent years, the finance ministry document explained.

This balanced approach aims to mitigate the risks associated with deficit financing while prioritizing sustainable economic development.

In terms of the medium-term outlook, the government expects domestic borrowing to remain stable at 2.9% of GDP.

However, the approach to marketable securities will see a significant nominal increase, with a planned reduction in the reliance on higher-cost National Savings Certificate instruments, which will see a gradual decrease in their contribution to the financing mix.

External financing is also projected to increase nominally between FY24 and FY26, driven by greater disbursement for large projects and increased budget support, though dependent on the pace of project implementation.

Bangladesh has received considerable budget support from external sources in recent years, a trend expected to continue in the medium term, the document stated, highlighting the ongoing commitment to leveraging both domestic and international financial strategies to meet fiscal challenges.

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