B Mirror Desk : As the government increased borrowing to resolve the budget deficit before the conclusion of the fiscal year, net government borrowing from the nation’s banking sector increased during the July–March period of the 2024–25 fiscal year compared to the same period the previous year.
The net government borrowing from the banking sector for the nine months was Tk 51,981 crore, a significant increase from Tk 29,939 crore during the same time last year, according to data from Bangladesh Bank.

The sum amounts to 52.5% of the government’s updated annual bank borrowing target of Tk 99,000 crore for the fiscal year.

According to central bank officials, since the Bangladesh Bank stopped devolving treasury securities, the government has increasingly relied on scheduled banks for financing.

The government borrowed Tk 93,371 crore during that time from commercial banks, which is a substantial amount more than the Tk 59,842 crore it borrowed during the same period in FY24.
The government reduced direct central bank financing during that time by repaying the Bangladesh Bank Tk 41,388 crore. Tk 29,903 crore was repaid to the BB throughout the same time frame in FY24.
As budgetary pressures increased, there was an especially sharp increase in borrowing in March, with net borrowing going from Tk 26,225 crore in July–February to almost Tk 51,000 crore in March. This suggests a significant reliance on borrowing prior to the financial year’s end in June.

The increase in bank borrowing, according to economists, highlighted the government’s difficulty in covering its spending requirements in the face of poor tax collection.

They claimed that the banking industry has taken over as the main source of funding for the deficit as tax revenues have fallen short of expectations.
High yields on Treasury securities were cited by bankers as the reason for the government’s increased borrowing.
According to them, T-bill and bond yields have risen to 11.86 and 13.6%, respectively, making them appealing investment possibilities for banks, particularly in light of the uncertain economy and weak demand from the private sector.

The government’s increasing reliance on commercial banks is partly a result of the Bangladesh Bank’s strategy of reducing inflation without printing money.
The central bank recently reorganized the boards of 14 struggling banks, some of which had been subject to lending restrictions because of financial irregularities, in an effort to address systemic flaws.

Banks have resorted to government securities because there aren’t many options for secure and lucrative investments.

As banks hoarded idle funds, the amount of excess liquidity in the financial system increased from June 2024 to Tk 2.34 lakh crore in January. As a result of waning investor confidence and risk aversion, private sector loan growth fell to 6.8% in February, the lowest level in 20 years. Since March 2023, inflation has stayed strong, above 9%, posting 9.35 per cent in March.