Government's increased bank borrowing

FE Team | Published: April 29, 2026 22:09:06

In recent months, the Government of Bangladesh has significantly increased its borrowing from the banking sector, raising concerns among economists, businesses, and the general public.
One of the basic reasons behind this is weak revenue collection. The government has struggled to meet its revenue targets due to administrative disruptions and slower economic activity. In 2025 revenue administration strike disrupted tax collection, resulting in reduced government income. As a result, the government has approached banks for financing its expenditures, including salaries, and development projects.
Another major factor is the global and regional economic crisis, mainly the ongoing Middle East conflict. This war has hampered fuel supply and increased energy prices, putting heavy pressure on Bangladesh, which depends heavily on imported fuel. To maintain energy supply and avoid raising domestic fuel prices, the government has been forced to spend more often financing this spending through bank borrowing.
The slowdown in economic growth and private investment also has an impact. Reduced business activity leads to lower tax revenue while increasing the need for government spending to stimulate the economy. At the same time, declining private investment has weakened overall economic condition, forcing the government to go for higher public expenditure.
Moreover, legacy fiscal pressures from the interim government have carried over into the existing administration. Earlier policies, combined with current political and economic adjustments, have created a situation where expenditures continue to exceed revenues. This mismatch has made borrowing a must in the short term.
The rising dependency on bank loans comes with risks. Excessive government borrowing can make it more difficult for businesses to obtain loans. This may result in reduced investment, decreased job creation, and slower long-term economic growth. Besides, higher borrowing may trigger inflation if not managed properly.
The recent surge in government bank borrowing in Bangladesh is driven by a combination of weak revenue collection, global economic shocks, rising subsidies, and structural fiscal challenges. While borrowing may provide short-term relief, experts emphasise the need for long-term solutions such as improving tax collection, reducing dependency on imports, and strengthening economic stability.
TahmidHasnineTashfin
Student
Department of Accounting & Finance
North South University
tahmid.tashfin@northsouth.edu