Nearing the end of its term, the government is borrowing more and more from scheduled banks.
In the last nine days, the Awami League-led government took Tk 41.20 billion from banking system – Tk 4.6 billion per day on average.
Though the borrowing rate was reasonable amidst criticism during the first 11 months of the 2012-13 fiscal ending on June 30, it saw a spurt as analysts had feared.
According to latest Bangladesh Bank statistics, the government took Tk 126 billion in loans during the first 11 months (July-May) of 2012-13 fiscal.
On Jun 12, the amount was more than Tk 167 billion.
In these 12 days, there were three public holidays, that is, effectively, Tk 41.2 billion was taken in nine days.
The central bank’s statistics show that the government took Tk 126 billion from scheduled banks in the first six months (July-December) of 2012-13. By Jun 12, the amount crossed Tk 241 billion.
Experts say this is because the government is aiming for development during its last few months.
Bangladesh Institute of Development Studies (BIDS) Research Director Zaid Bakht told bdnews24.com that it was normal that a government’s developmental work would increase during the latter part of the fiscal year.
“It is not possible only with revenues to meet the expenses. That’s why the government has been forced to turn to banks.”
Former Finance Advisor to a caretaker government, AB Mirz Azizul Islam, said the government had planned for this.
“The government will take more loans nearing the end of their term, that is why they extended the borrowing target to Tk 285 billion in the amended budget (for 2013-14).”
The original borrowing target the government had in the proposed budget was Tk 230 billion.
Zaid Bakht said the government was methodical in taking loans. “They are not taking loan from the central bank to keep inflation in check. Rather, they are repaying previous loans with interest.”
The government repaid Tk 74 billion with interest to Bangladesh Bank until Jun 12. On the other hand, loan from scheduled banks were Tk 241 billion – Tk 10 billion more than target.
“There is a huge sum of idle money (not invested money) in banks. There is no problem if it is used for development,” Bakht said.
“But these funds should not be wasted on a political agenda,” Bakht warned.” It is okay if this money is used for priority projects.”
The Reserach Director said the government borrowing might increase further. “The government might want to complete important projects for polls-time popularity.”
A Bangladesh Bank official said the government was considering inflation-related issues for not borrowing from the apex bank.
Bangladesh Bank Chief Economist Hassan Zaman said, “It is mainly to check inflation that the government is not borrowing from the central bank. When money is borrowed from us, money supply increases in the market and inflation rises.”
Businessmen had been complaining of reduced loan quantam from the private sector in the wake of the government borrowing spree.
However, Zaman said government borrowing will not affect businesses this time. “The banks have a lot of money. It has not been invested. Even after government borrowing, quite a lot of funds will still be available. There will be no problem.”
According to Ministry of Plannning, the first nine months (July-March) of the current 2012-13 fiscal year saw 49 percent implementation of the government’s Annual Development Programme (ADP). Last fiscal year, the rate was 45 percent.
Even in the past, during the last year of a government term, there have been high rates of ADP implementation.
According to Bangladesh Bank information, the total loans taken from scheduled banks amounted to over Tk 187 billion. But no loans were taken from the central bank. Instead, Tk 70 billion in debts was repaid to it by the government.
In the 10 months (July-May) of the current fiscal, loans mounted to more than Tk 116 billion. Last year, it was Tk over 155 billion.
There is no precise information on the amount of ‘idle money’ in the banking sector. The central bank claims it could be as high as Tk 220 billion.
The banks put the amount at over Tk 1 trillion.
Zaid Bakht said he thought the government was cautious about taking loans from Bangladesh Bank so that the opposition cannot blame it for inflation.
In the budget for 2012-13 fiscal, the government aimed to borrow Tk 230 billion from banks to cover deficits.
Source: Bd news24
