Bank borrowing by the government stood at Tk85,000 crore in the just concluded fiscal year, up by Tk37,633 crore from the original estimate and Tk3,000 crore more than in the revised target.
Huge revenue earnings shortfall and dull business activities, particularly in the final quarter of the last 2019-20 fiscal year, are two major reasons that compelled the government to borrow almost double the original borrowing estimate from the ailing banking sector.
The government had initially set a bank borrowing target of Tk47,364 crore to finance a large part of its deficit financing for the last financial year.
The target was, however, revised in May to Tk82,000 crore.
The government is hugely dependent on the banking sector for money due mainly to a huge revenue shortfall, says AB Mirza Azizul Islam, a former advisor to the last caretaker government.
In the just concluded fiscal year of 2019-20, the National Board of Revenue (NBR) recorded a 3.79% negative growth in tax revenue income owing mainly to the economic fallout caused by the coronavirus pandemic.
The revenue board managed to collect Tk2,15,400crore till June 30, down by Tk8,492 crore from last year as earnings have been far behind the revised target for FY20, according to primary data from the NBR.
The high dependency, said AB Mirza Azizul Islam, on bank borrowing impacted the private sector credit.
Private sector credit growth consistently dropped to 8.83% till April of the concluding fiscal year. However, credit growth rose in May to 8.86% from the previous month, as per central bank data.
Azizul Islam said the government's over dependence on the banking sector would reduce private investment as the flow of credit to the private sector decreased.
Of the total Tk85,000 crore; Tk69,000 crore was borrowed from commercial banks and the rest of the amount from the Bangladesh Bank, according to the latest data of the central bank.
The government borrowed a big chunk of the money through 10 -year, 15- year and 20- year bonds.
Currently, banks are encouraged to invest in government bonds and bills, as the area was safer than lending to the private sector, a high official of a private commercial bank noted.
The government borrowed Tk26,464 crore in FY2018-19. In fiscal 2017-18, it borrowed Tk5,666 crore from the banking sector.
The government did not borrow any money from banks in fiscal year 2016-17, but repaid Tk18,029 crore.
The government borrowed Tk329 crore in the 2015-16 fiscal year, but it did not borrow any money in the 2014-15 fiscal year, but repaid TK6,870 crore.
In the 2013-14 fiscal year, the government borrowed Tk7,950 crore from the banking sector. The figure was Tk24,776 crore for the 2012-13 fiscal year.
The government has fixed a higher borrowing target from banks for the 2020-21 fiscal year in order to finance the projected budget deficit.
Of the estimated budget deficit, Tk84,980 crore will be borrowed from the banking system, while Tk20,000 crore will come from national savings schemes.
