Government’s bank borrowing shoots up to Tk 81,000cr

HM Murtuza | New Age  May 17,2020

A file photo shows a man counting Tk 1,000 notes in the capital. — New Age photo

The government’s borrowing from the country’s banks to meet budget deficit increased to Tk 81,000 crore as of May 13 this fiscal year due to a dismal revenue collection amid the global coronavirus outbreak.

Of the amount, the government in two and a half months borrowed around Tk 28,863 crore amid the outbreak of coronavirus in the country.

According to the Bangladesh Bank data, the government’s outstanding bank borrowing stood at Tk 1,89,096 crore as of May 13 this year from Tk 1,08,095.7 crore on June 30, 2019.

Of the Tk 81,000 crore, the borrowing through treasury bills and bonds from scheduled banks stood at Tk 69,000 crore and the remaining Tk 12,000 crore was borrowed from the central bank.

Mentioning the poor revenue collection as the cause of the surge in the government’s bank borrowing in the current fiscal year, former BB governor Salehuddin Ahmed told New Age that the government should lower the bank borrowing so that the banks could implement the government-announced stimulus packages.

Instead of borrowing only from the scheduled banks, borrowing from the central bank would be better though there was risk of inflation, Salehuddin said.

He also emphasised tighter fiscal and monetary management to tackle the situation rather than depending only on bank borrowing.

Predicating that it would take one to two years to overcome the economic losses, the former BB governor suggested that the government should focus on availing foreign grants as well as low-cost fund from private fund management entities to reduce the pressure on the local banks.

To tackle the dismal revenue collection situation, the National Board of Revenue must improve its performance along with containing irregularities, he said, suggesting that the corporate tax rate should be reduced and the tax net should be enhanced.

Speaking about the fiscal management, Salehuddin said, ‘I do not understand why the government is not shifting the unutilised portion of annual development programme instead of borrowing from the banks.’

In the budget for the fiscal year 2019-2020, the government initially projected to borrow Tk 47,364 crore from the banking sector. The target was later revised to Tk 72,953 crore.

The latest borrowing figure showed that the government’s bank borrowing had already exceeded the initial target by Tk 33,636 crore and revised target by Tk 8,047 crore with another critical one and a half months of the fiscal year remaining.

Policy Research Institute executive director Ahsan H Mansur told New Age recently that the government’s bank borrowing would increase further in the coming days due to the sorry state of revenue collection.

He also predicted that the revenue shortfall in the current fiscal year could be up to Tk 1,15,000 crore against the revised target of Tk 3,00,000 crore.

The initial target was Tk 3,25,000 crore in revenue in the current fiscal year of 2019-2020.

In the July-March period of FY20, the NBR collected Tk 1,66,007 crore in revenue, leaving another 45 per cent of its annual target to be collected in just three months.

The revenue collection deficit did not result only from the coronavirus pandemic in the country but also from the NBR’s lack of capacity and the government’s ambitious target, Ahsan said.

He also mentioned that the ADP implementation in the current fiscal might fall up to Tk 80,000 crore short.

The government has curtailed the ADP implementation target to Tk 1,91,921 crore.

In July-April of FY20, the government implemented 49 per cent of the ADP, the lowest since FY15 when the implementation in the 10 months was more than 50 per cent.

The government’s net borrowing from the banking sector was Tk 19,800.9 crore in the entire 2018-2019 fiscal year.

The government repaid Tk 18,405 crore and Tk 2,851.2 crore in FY17 and FY18 respectively against its borrowing from the banking sector.

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