Government bank borrowing goes ballooning with the fundraising through special auction of bonds and bills to pay for five-in-one Sammilito Islami Bank and possible liquidation of nine hard-up nonbanks.
To meet the fresh financing challenges, amid less-than-expected level of revenue-mobilisation drives, the Ministry of Finance (MoF) keeps holding special auction of government securities (G-sec) going beyond the regular schedule through which it is borrowing from the banking sector.
As part of the move to foot the bill for bailout of the banks and non-bank financial institutions (NBFIs) pushed into problems through past malpractices, the ministry has called for a special auction of 91-day- tenure treasury bill today (Wednesday) to generate an additional Tk 50 billion from the banks.
Earlier on November 27, the government borrowed Tk 50 billion from the commercial banks through issuing its 5-year treasury bond.
Earlier, the ministry concerned at a scheduled auction on November 16, 2025 took Tk 12.89 billion in addition to the notified amount of Tk 25 billion from the banking industry, sources at MoF and Bangladesh Bank (BB) have said.
In order to feed growing funding requirements, the government has already revised up its domestic bank-borrowing target to Tk 1.17 trillion from the initial budget target of Tk 1.04 trillion.
According to official statistics, the government borrowing from the banking system until November in the FY'26 stands at Tk 374 billion, Tk 124-billion higher from the corresponding period of last fiscal (Tk 250 billion).
Seeking anonymity, a MoF official says the government needs additional funds to support Samillito Islami Bank, formed through the merger of five liquidity-strapped Islamic banks. In addition, the government has decided to liquidate nine struggling NBFIs, and it would possibly require Tk 50 billion.
"Wherefrom the fund will come? There is some growth in revenue mobilisation but it is not enough to support these. That's why we keep holding special auctions. There is nothing wrong with it," the official told The Financial Express.
Former lead economist of World Bank's Dhaka office Dr Zahid Hossain says they did not see any fall in revenue collection, development-funding spike and rise in operational expenses in the public administration or social protection.
"Then why do we see government bank-borrowing spike. It's probably because of the Sammilito Islami Bank and possible liquidation of nine NBFIs apart from expenses for holding upcoming general election," he says.
He thinks the government is likely to discourage budget-support financing from external sources but for development projects. "I don't think it is a right move because budget-supported financing comes with institutional policy reforms. If we do it properly, it will have the same impact that any other investment projects," the country's eminent economist explains.
He feels this financing strategy would intensify pressure on the banks, which would trigger crowding-out impact on the money market.
Speaking on condition that he should not be quoted by name, a BB official dispels the fear of crowding-out effect, saying that the central bank keeps purchasing US dollar and injecting liquidity into the banks.
Citing an example, he says the BB on Tuesday bought $202 million from banks as part of its foreign-exchange market intervention under the existing crawling-peg mechanism and injected
Tk 247 billion into banks.
"So, the banks have enough liquidity to participate in such special auction of Tk 50 billion. It means there will be no crowding-out impact," the central banker adds.
Founding chairman of Policy Exchange Bangladesh Dr M Masrur Reaz suggest the government should create more spaces within the current challenging realities with regard to resources by prioritising private investment or PPP (public-private partnership) instead of public investment wherever it is possible to do so.
He notes that consolidation, mergers and closure are inevitable for cleaning up the financial sector and the banking regulator must find out solution which is market-driven.
For an example, he says, the central bank can opt for market-based solution through private-sector takeover of the troubled banks through merger process, which will likely save government from the burden of recapitalisation.
Simultaneously, if distressed asset-management company is put in place, a part of the distress assets can be sold to such company.
"It can lessen the pressure on the government," the economist says,
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