High borrowing target from banks set by the government to meet budget deficit will affect the private sector investment
Abu Sazzad: The net domestic borrowing of the government stood at Tk 44442.20 crore during the first ten months (July-April) of the just concluded fiscal 2018-19 after the adjustments with T-Bills and Bonds, NSD, Ways and Means Advances (WMA), advances to Food Ministry and other Ministries, Overdraft (OD) current and block accounts, accrued interest, and advances and deposits of autonomous and semi-autonomous bodies, balances of GIIB (Government Islamic Investment Bond) fund as well as deduction of cash balance in the form of deposits with Bangladesh Bank and scheduled banks including banking and non-banking sources.
The amount was Tk39460.80 crore and Tk14813.8 crore during July-March of FY19 and July-April of FY18 respectively. The government domestic borrowing during this period is 200 percent higher than that of the same period of the previous year, according to the data of Debt Management Department, Statistics Department, Bangladesh Bank and National Savings Directorate.
Meanwhile, the government borrowed Tk. 43474.5 crore through NSD instruments in the first ten months.
The government borrowed Tk 457 billion of which Tk 434.70 billion through NSD instruments from other than banks which already exceeded the Non-Bank budget target.
However, the government revised the target of its net borrowing from savings instruments for FY 2018-19 upward to Tk 450 billion from Tk 261.97 billion. Government borrowings from NSD instrument is significantly increasing due to its relatively higher interest rate than other savings rates.
On the other hand, the government borrowed (net) Tk. 9040.3 crore through TBills and Bonds from the banking system at the same period.
Actually, the government borrows from two domestic sources including banking system through Treasury Bills (T-Bills) & Bonds and the non-banking system mainly through National Savings Directorate (NSD), a senior BB official said. It is observed that the government deposits increased by Tk. 2099.3 crore with the banking system during this period.
Deposits with Bangladesh Bank (BB) increased by Tk. 2157.5 crore and deposits with scheduled banks (SBs) decreased by Tk. 58.2 crore.
Govt. domestic borrowing has been increased by Tk. 4981.4 crore (borrowed Tk. 4938.1 crore from BB and Tk. 3749.9 crore from on-bank and repaid Tk. 3706.6crore to SBs) which is Tk. 1546.1crore higher than that of the month of March, 2019.
In the budget of FY19, it has been fixed for government borrowing from domestic sources at Tk71227 crore of which Tk 42030 crore from banking system and Tk 29197crore from non-banking sources.
During July-April of FY19, the net repayment and holding of cash balances with Bangladesh Bank stood at Tk 5544.40 crore.
On the other hand, the net borrowing from scheduled banks stood at Tk 4281.80 crore during the same period.
Experts pointed out that the government borrowing from the domestic sources especially from the banking sector is not rational to consider the present perspective of the banking sector.
The country’s banking sector is already facing a liquidity crisis and further borrowing by the government from the banks will add to the crisis, observed.
Experts fear that a high borrowing target from banks set by the government in order to meet the budget deficit for the fiscal year (FY) 2019-20 will affect the private sector investment.
Talking to Daily Industry, former chairman of Association of Bankers, Bangladesh (ABB) Mutual Trust Bank Ltd Managing Director Anis A Khan told that most banks are under pressure to bring down the advance-deposit ratio (ADR). As a result, the private sector credit growth is very slow. On the other hand, the banking sector is not getting enough deposits from government organizations.
The private sector will be affected if the government takes such big amount from banks for the budget, he said.
World Bank lead economist Dr Zahid Hossain said the banking sector is currently facing liquidity crisis due to a number of reasons and one of the reasons is high amount of non-performing loans (NPLs).
“If such situation continues and the government borrows from this sector for the budget deficit, private investments will be hampered and employment opportunities will go down,” he added.