B Mirror Report: The government is expected to continue relying heavily on bank borrowing to finance the budget deficit in the proposed fiscal year 2026–27, despite efforts to increase foreign financing.

According to Finance Ministry sources, the proposed budget size for FY2026–27 has been set at Tk 938,000 crore, while revenue collection is projected at Tk 695,000 crore, resulting in a budget deficit of Tk 243,000 crore. Finance Minister Amir Khasru Mahmud Chowdhury is scheduled to present the budget in Parliament on June 11, marking the first full-year budget of the BNP-led government.

To bridge the deficit, the government plans to raise Tk 127,000 crore from domestic sources and Tk 116,000 crore through foreign loans and grants. Of the domestic borrowing target, Tk 112,000 crore will come from the banking sector, while Tk 15,000 crore will be mobilized through savings certificates and other sources.

Although the government is placing greater emphasis on external financing, past trends suggest bank borrowing often becomes the main source of deficit financing when foreign funding falls short.

The foreign financing target has been set significantly higher than the revised target for the current fiscal year. While the government initially aimed to secure Tk 101,000 crore in foreign loans and grants in FY2025–26, the target was later reduced to Tk 63,000 crore due to lower-than-expected inflows. Achieving next year’s target will require a substantial increase in external funding.

Banking sector experts have cautioned against excessive dependence on bank loans. Mohammad Nurul Amin, former chairman of the Association of Bankers Bangladesh (ABB) and current chairman of Bangladesh Krishi Bank, said heavy government borrowing from banks could create risks for the economy.

He noted that borrowing from the central bank may increase inflationary pressures through money creation, while excessive borrowing from commercial banks could reduce liquidity and limit credit availability for the private sector.

Government borrowing from banks has already exceeded expectations in the current fiscal year. Against a target of Tk 104,000 crore, net bank borrowing reached Tk 109,568 crore between July and May 10.

The proposed budget targets 6.5 percent GDP growth and aims to reduce inflation to 7.5 percent in FY2026–27. However, inflation remains elevated, with the Bangladesh Bureau of Statistics reporting a point-to-point inflation rate of 9.42 percent in May.

Meanwhile, revenue collection continues to face challenges. NBR data show a revenue shortfall of more than Tk 104,000 crore during the first 10 months of the current fiscal year, raising concerns about the government’s ability to meet its revenue targets and reduce reliance on borrowing.

Economists believe that improving revenue collection, controlling inflation, and ensuring sustainable deficit financing will be among the government’s key economic challenges in the coming fiscal year.