Govt outstanding borrowing from banking sector stood at Tk 88,823.82 cr due to poor revenue collection of NBR
Abu Sazzad: The implementation of annual development programme (ADP) is forcing the government to borrow from the banking sector in the recent months of the ongoing fiscal 2019. Experts pointed the sluggish revenue collection by the national board of revenue (NBR) was one of the major reasons behind increasing the government borrowing from the banking sector. The government’s outstanding borrowing from the country’s banks including Bangladesh Bank increased to Tk 88,823.82 crore in April this year from Tk 86,275.87 crore in February this year.
As per the BB statistics, Tk 2,547.95 crore was borrowed from the banking sector in March and April with the net government borrowing from the banking sector reaching Tk 566.15 crore in FY19.The net government borrowing from the banking sector in July-April of FY18 was negative Tk 24,481.74 crore.
As the government required funds for the implementation of around 50 per cent of the annual development programme of FY19, its borrowing from the banks increased, said sources.
They said that the government’s borrowing would increase in the coming days to meet the budgetary requirement with only one and a half months of FY19 remaining.
In this backdrop, income tax, value-added tax and customs wings of National Board of Revenue in the first nine months (July-March) of FY19 managed to collect Tk 1,53,419.89 crore, which is only 51.79 per cent of the annual revenue collection target.
Former finance minister AMA Muhith said the pace of revenue collection in July-February of FY19 was poor considering the government’s budget projection. The government has undertaken several initiatives to revamp banking sector. In my opinion, the government are borrowing from internal and external resources to implement its ADP for ensuring growth of the country.
Now, the government is cautious to borrow from banking sector to consider its present unpleasant situation of the banking sector, Muhith said.
Talking to Daily Industry, Syed Habib Hasnat, Managing Director of NRB Global Bank Limited told that the government borrows from scheduled banks through government T-bills and T-bonds and the non-banking system mainly through National Savings Directorate (NSD) for meeting its deficit financing.
Higher bank borrowing by the government may continue in the coming months as the implementation of annual development programme (ADP) will pick up speed, Hasnat said adding that, normally, the implementation rate of ADP goes up in the second half of each fiscal year.
Apart from this, the revenue shortfall would force the government to borrow more from the banking system to meet the budget deficit partly.
Commenting on the government borrowing, the managing director said currently banks are facing multifarious crisis including, high NPL, ADR adjustment, liquidity and provision shortfall. In such circumstances, banks would affect further if the borrowing trend of the government continues in the upcoming months, he predicted.
To resolve liquidity shortage, banks are forcing to take higher amount of loans from Bangladesh Bank (BB) through repurchase agreement (REPO), he mentioned.
ADR adjustment, higher NPL, government borrowing are the major reasons for liquidity shortage of banks, he explained.
The adjustment of ADR had become a major problem for the banks, and for this, a good number of banks could not release credit to the private sector against their demand, Hasnat observed.
Banks in recent times have increased borrowing money from the central bank to cope with the shortage while inter-bank loan transactions have also rose, he pointed out.
Riding on higher demand for liquidity, call money rate increased in the recent months. All these problems are imposing on the banking sector for higher volume of NPL amount, Hasnat mentioned.
Country’s schedule banks borrowed Tk 13,475.80cr from Bangladesh Bank through repurchase agreement (repo) from July, 2018 to March 5, 2019 while the entities borrowed Tk 572.86 cr in the entire 2017-2018 fiscal, a data of Bangladesh Bank.
Former Bangladesh Bank deputy governor Ibrahim Khaled said the government has to target borrowing for its budget deficit which has become a phenomenon of Bangladesh. But this time, government borrowing from the sector would make an unhealthy banking sector which is not good for macro-economic development of the country.
Already, the private sector credit is impeding for fund crisis of bank. Considering this, the government has to speed up the revenue collection target to implement its ADP.
Besides, the central bank should immediately curb the growing trend of borrowing by the bank directors. .He claimed previously directors use to take huge loans from their own banks, but now they borrow from the other banks through mutual understanding. As a result, one director is taking loan facilities from other banks and the growing trend of this practice is matter of serious concern, he lamented.
Dr Salehuddin Ahmed, former governor of the Bangladesh Bank said the private sector is severely affected due to the massive borrowing from the banking sector.”
“Many industrial units are shutting down due to high interest rate while the investment is also highly interrupted due to liquidity crisis,” he added. Salehuddin said investors in the industry are not getting anything from the capital market. If the government borrowing from the bank system increases it will push dollar price resulting in further inflation, he added.