Government debts go ballooning, with the volume rising by Tk 378.43 billion to Tk 16.552 trillion as of last September, entailing hefty repayment inclusive of interest.
The latest bulletin of the Ministry of Finance (MoF) shows the figures, giving economists to believe that such debt situation may create imbalances in public finance.
And most of the borrowings are coming from the banking system through lucrative instruments like state treasury bills and bonds, the statistics show.
The data issued by the finance division of the MoF revealed that the government heavily relied on domestic borrowing to bridge the gap between its high spending and low revenues.
The domestic borrowings stood at Tk 9.741 trillion at the end of September 2023 while the external debt at Tk 6.811 trillion, the data said.
Total debt-to-GDP (gross domestic product) ratio stood now at 33.35 per cent, as of September 2023. And domestic debt-GDP ratio was 19.63 per cent while external debt-GDP at 13.72 per cent, according to the data.
"An unprecedented increase in debt servicing due to extensive borrowings has created serious imbalances in the public finances, leading to a rise in government spending on interest payments," says a finance official.
The interest expenditure stood at Tk 230.18 billion during the first quarter of this fiscal year. Such expenditure on debt service was recorded at Tk 190.93 billion during the same period a year before.
Interest expenditure on domestic borrowing was recorded at Tk 188.71 billion while external debt-servicing amount stood at Tk 41.47 billion, the MoF data showed.
But the interest expenditure for nonbanking sources, namely the national savings certificates, dropped by 10 per cent to Tk 108.15 billion during the July-September quarter of the fiscal year.
Further details show that the government goes borrowing heavily from banking sources. The bank debt, as of September, was worth Tk 5.387 trillion in a rise by Tk 310.22 billion from June 2023.
The yield curves reflect the rising cost of borrowing through government securities for the first quarter of FY24 vis-à-vis the same period in FY23.
In the meantime, heavy borrowing through treasury bills and bonds showed banks parking their money in risk-free high-yielding government papers. As a result, bank advances to the private sector plunged in the outgoing fiscal year.
The government mainly borrowed with treasury bills during the period under review (July-September 2023), to the tune of Tk 185.27 billion, while from bonds worth Tk 97.81 billion.
However, reform initiatives, such as online issuance process, rationalised investment limits and the introduction of multi-tier interest rates along with inflation contributed to the reduction in the net sales of the national savings certificate or NSC instruments. The net borrowing from the NSC was negative at Tk 12.65 billion.
Bangladesh still has access to concessional external financing from multilateral and bilateral partners and prefers this mode of financing. Up to 30 September 2023 (FY2023-24), Bangladesh had received Tk 80.87 billion from external financing sources.
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