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Bank borrowing declines 34% in Q1

  • Published at 10:20 pm November 12th, 2019
Web_bangladesh-bank--Mehedi-Hasan
File photo of the main entrance of Bangladesh Bank in Motijheel area of the capital Mehedi Hasan/Dhaka Tribune

While revenue earnings witnessed a moderate growth in the first quarter, and fell short of targets, the low extent of government borrowing suggests the gloomy investment situation prevailing in the economy, say economists

Bank borrowing by the government has declined drastically during the first four months of the current fiscal year as development spending took a nosedive, officials and bankers have said.

While revenue earnings witnessed a moderate growth in the first quarter, and fell short of targets, the low extent of government borrowing suggests the gloomy investment situation prevailing in the economy, say economists.

The government borrowed Tk33,587 crore from the country’s banking system as of October 30 of the current fiscal year to meet its budget deficit, according to the latest Bangladesh Bank data.

The amount of borrowed amount during the same period of last fiscal year was to the tune of Tk50,763.27 crore, down by 33.83%.   

Of the total Tk33,587crore, the government borrowed Tk26,834.05 crore from the scheduled banks, using treasury bills (T-bills) and bonds, and Tk6,752.89 crore from the Bangladesh Bank, says the central bank’s data. 

A significant fall in sales of national saving certificates (NSCs) and revenue collection led to bank borrowing by the government, a high official at the central bank said. 

On the other hand, a top finance official said the development expenditure during the first quarter failed to pick up as land acquisition and project preparation typically take more time during the initial months of any given fiscal year.

He, however, said the borrowing would pick up and even might go beyond the bank borrowing target of the government at the end of the year.

The net sales of NSCs fell by 62.72% or Tk2,522.63 crore in August, the second month of the current fiscal, as compared to the same month in the last fiscal, owing to an increase in tax, imposed on the income from NSCs. 

In August of this year, the net sales of NSCs stood at Tk1,499.37crore against Tk4,022crore during the same period of last year, according to the Department of National Savings data.

Besides, the revenue collection in the first quarter (July-September) of this fiscal stood at Tk47,388 crore against a target of Tk62,229 crore, resulting in a deficit to the tune of Tk14,907, according to the National Board of Revenue (NBR). 

The government has fixed a higher borrowing target from banks for FY2019-20, in order to finance the projected budget deficit.  

For deficit financing, the government has planned to borrow Tk63,848 crore from foreign sources and the rest Tk77,363 crore from domestic sources.

Of the borrowing target from banking sector, the government planned to borrow Tk28,094 crore as long-term debt and Tk19,270 crore as short-term debt.

Apart from the bank borrowing, another Tk29,999 crore would be borrowed by the government from selling national savings certificates.

The government’s net borrowing from the banking sector was Tk19,800.9 crore in the last fiscal year.