Government borrowing from savings certificates and banks to fill the budget gap has been slow, but towards the end of the current fiscal year, borrowing from the banking system increased sharply.
In the first 11 months to May, the government received a net loan of Tk 32,652 crore but the borrowing increased to Tk 15,265 crore in just 22 days of June.
The government has borrowed Tk 18,157 crore from savings certificates in the first 11 months of the current fiscal year, which is only 56.74% of the government’s target for the fiscal year in this sector .
For the current financial year, the government has set a target of Tk 32,000 crore in borrowing from savings instruments. Hence, in the current month, the government needs to borrow Tk 13,842 crore from this sector to meet the target.
Those concerned said that the government had taken less net lending from the sector due to lower spending on the Annual Development Program (PAD).
Although government borrowing from the banking system slowed, its bank borrowings increased at year-end.
The government’s domestic borrowing target for FY22 has been revised down to Tk 1,24,288 crore. Borrowing target from the banking system has been reset to Tk. 87287.0 crore and other domestic non-bank sources at Tk. 37,001.0 crore (including Tk 32,000 crore via net sales of National Savings Schemes).
In the first 11 months of the current financial year, the government borrowed a total of Tk 97,350 crore by selling savings certificates. Previously, it had repaid Tk 79,192 crore in terms of principal and sector profit.
An official from the National Directorate of Savings said on condition of anonymity: “The government has reduced borrowing on savings certificates as it obtains loans at lower interest rates from the banking system. , current year spending was below target in the development budget, so borrowing on the savings certificate was down.”
In the current financial year, the government has set an ADP implementation target of Tk2.17 lakh crore. However, the government spent over Tk 1.42 lakh crore, or 65.56 percent of the target, in the first eleven months of the fiscal year.
Meanwhile, demand for government loans increased towards the end of the year although its borrowing from the banking sector was slow.
As of June 22 of this financial year, the government has received a net loan of Tk 47,917 crore from the banks.
According to Bangladesh Bank data, the interest rate on 182-day treasury bills was 6.59% on June 12. On the same day, the government fixed an interest rate of 6.5% on the 91-day Treasury bill. Previously, on June 15, the interest rate on five-year Treasury bills stood at 7.80%.
However, in June of last year, the interest rate on 91-day Treasury bills was only 0.52%. Interest was 0.6% on 182-day Treasury bills. Furthermore, the interest rate on the five-year bills was 3.84%. Banks are investing heavily in government debt instruments as their interest rates continue to rise.
The government has increased its borrowing a lot lately. In total, on June 14, the government’s total debt in the banking system stood at over Tk 2.50 lakh crore.
The government has set a target to borrow Tk 1,06,334 crore from the banking system for the next financial year 2022-23. Out of this amount, Tk 87,287 crore has been earmarked for the banking system.