Time Business Desk: The government’s borrowing from the Bangladesh Bank crossed record Tk 1 lakh crore as of December 15, which may raise inflationary pressure in the country.
According to the latest Bangladesh Bank data, the government’s borrowing from the central bank reached Tk 1,04,884.09 crore as of December 15 from that of Tk 17,810 crore as of December 15, 2021.
The amount was Tk 86,403 crore on November 15, Tk 72,700 crore at the end of September and Tk 55,866 crore in June.
Policy for Research Institute of Bangladesh executive director Ahsan H Mansur told that government’s borrowing from the central bank meant printed money was injected into the market that could flare up inflation as it would push up the consumer price level further.
He said that the excessive borrowing from the BB was alarming as people had already been struggling with high inflation.
The government’s borrowing from the central bank ballooned as its borrowing requirement rose significantly and banks were struggling with liquidity shortage. Mansur said.
Besides, borrowing from banks is costly and the government does not want to increase its interest burden, he said.
The government’s borrowing from the central bank was Tk 49,017 crore in July-December 15 of the financial year 2022-23.
The government’s net borrowing from the country’s banking system including the BB, however, was Tk 31,972 crore in the July-December 15 in 2022 as the government repaid loans to the scheduled banks rather than taking credits from them.
The government’s net bank borrowing was Tk 19,636 crore in the same period in 2021.
The target of borrowing from the banking system has been set at Tk 1,06,334 crore for FY23.
The government’s total outstanding borrowing from the bank sector increased to Tk 3.02 lakh crore on December 15, which was Tk 2.14 lakh crore on June 30.
According to the BB data, the government’s borrowing from the central bank was Tk 24,542.14 crore as of June 30, 2021.
Bankers said that the government’s bank borrowing increased due to rising government’s expenditures against its significantly low income.
It also could not get money from selling national savings certificates, they said.
The net sales of NSCs was Tk 96.31 crore negative in October after it was Tk 70.63 crore negative in September.
Besides, the country’s banking sector was facing liquidity shortage due to a slow deposit growth against high lending growth and a surge in the dollar purchase from the central bank to meet the foreign currency crisis, the bankers said.
In July-November, the BB sold over $6 billion directly to banks to address dollar crisis in the banking sector, which, in turn, mopped up equivalent amount of local currency from the banking system.
Finding no other options, the government might choose the central bank for financing its huge expenditures, the bankers said.
To finance the budget, the government borrows mainly from two domestic sources banking system and other non-banking domestic sources.
The government borrowing from the banking system consists of borrowing from the central bank and the scheduled banks.
From the banking system, the government borrows mainly through advances, overdraft and issuance of treasury bills and bonds.
On the other hand, the government borrowing from non-banking domestic sources includes savings instruments introduced by the Department of National Savings and government T-bills and bonds held by non-bank financial institutions, insurance companies and individual investors.
For FY22, the government targeted to borrow Tk 76,452 crore from the banking sector.