To cover the budget deficit, the government borrowed Tk 59,516 crore from the banking system in the first four months of FY 2024-25, with a significant portion directed to repaying debt to Bangladesh Bank.
A confidential report from Bangladesh Bank reveals that the Ministry of Finance raised Tk 59,516 crore from domestic scheduled banks by issuing treasury bills and bonds between July and October. Of this amount, Tk 39,107 crore was allocated for debt repayment to Bangladesh Bank.
Despite this borrowing, the government’s net debt for the fiscal year stands at Tk 20,409 crore, reflecting its efforts to address the budget shortfall.
Government data shows that the net bank debt gap was slightly under Tk 3,182 crore during the same period in FY 2023-24.
A senior official involved in the government’s debt management program noted that recent declines in revenue have forced the government to increase its borrowing from the banking system. He added that economic uncertainty, coupled with severe flooding across various regions, has impacted revenue collection in the first quarter of the current fiscal year.
According to National Board of Revenue (NBR) data, revenue collection declined by 6.07 percent, or Tk 4,584 crore, during the July-September period this year compared to the same period in the 2023-24 fiscal year. NBR collected Tk 70,902 crore in the first quarter, down from Tk 75,487 crore last year and falling short of the Tk 96,499 crore target. However, revenue collection is expected to improve in the second quarter as economic activities begin to stabilize across the country.
Commenting on deficit financing, he explained that instead of printing money, which could add inflationary pressure, the government has opted to borrow primarily from commercial banks. Bangladesh Bank’s Strategic Wages and Means Advance facility provided Tk 10,649 crore, enabling government borrowing from the banking system. Additionally, the government accessed Tk 12,000 crore through this facility to cover daily expenses, alongside an overdraft facility from the central bank, allowing for up to Tk 12,000 crore in additional short-term borrowing for similar needs.
Officials stated that the bank borrowing target may be lowered soon as the interim government revises the Annual Development Program (ADP) and halts non-essential projects. ADP implementation in the first quarter of the current fiscal year hit a 15-year low, driven by cautious spending and political unrest.
According to official data, the government spent 4.75% of the ADP allocation of Tk 13,215 crore during the July-September period of the 2024-25 financial year. For this fiscal year, the government has set a borrowing target of Tk 1,37,500 crore, up from Tk 1,32,395 crore in the previous year. However, in the last fiscal year, the government borrowed Tk 1,55,935 crore, exceeding its target. In comparison, the government’s net bank debt in 2014-15 stood at Tk 94,282 crore. To meet its borrowing needs, the government plans to issue long-term bonds worth Tk 72,682 crore and the remaining Tk 64,818 crore through treasury bills (T-bills).
The government is currently auctioning four types of Treasury bills to strengthen borrowing from the banking system, with tenors of 14, 91, 182, and 364 days. Additionally, five government bonds with maturities of 2, 5, 10, 15, and 20 years are also being traded.
A senior executive at a leading private sector bank stated that commercial banks prefer investing their excess funds in government bonds due to their strong profitability and safety. With reduced demand for private sector loans in recent months, banks are increasingly turning to risk-free government securities.
Bd-pratidin English/ Jisan
