The government's borrowing from non-bank sources, including that from some non-traditional ones, marked a steep rise in the fiscal year 2013-14. This has led to a rise in the overall debt-servicing liabilities of the government.
The government's net borrowing from non-bank sources comprising national savings tools and 'others' stood at Tk 197.37 billion as against the target set in the revised budget at Tk 110 billion.
The government usually borrows more from banking sources in the form of treasury bonds and treasury bills, but this time there was a paradigm shift in its borrowing.
The government borrowing from non-traditional sources dubbed as 'others' surged by more than 165 per cent in the last fiscal year.
The 'others' comprise seven heads like state provident fund, suspense accounts, securities of different bids, current assets and so on.
The government wanted to borrow Tk 29.99 billion from the 'others' sources, but such borrowings finally stood at Tk 79.63 billion.
Official sources at the Finance Division told the FE Monday that the government borrowed from funds earmarked for different projects. The contractors concerned had failed to execute those projects timely.
"There were substantial amounts of funds belonging different projects, not released before June 30. We borrowed from those," said a senior official at the Finance Division.
However, borrowing from the national savings schemes grew by more than 47 per cent than the revised target set for the last fiscal year.
It originally wanted to borrow Tk 80 billion through the national savings tools. But, eventually, it borrowed Tk 117.74 billion.
On the other hand, the government's borrowings from the country's banking system were 39 per cent less than the revised target set for the fiscal.
Terming non-bank borrowing as very expensive, leading economic analysts argued that the government should have utilised cheaper options to fund its budget deficit.
Dr. Zahid Hussain, lead economist at the Dhaka office of the World Bank (WB), said increased reliance on non-bank borrowing trend to shrink the fiscal spaces.
"This type of reliance raises the cost of funds," said the WB economist.
It is believed that the increased non-bank borrowing has raised the average cost of fund by more than 11 per cent. It was 8.0-9.0 per cent even a few years back, sources said.
This should have been much lower if the government used to borrow from the banking sources, another key source of domestic borrowing, Dr. Hussain said.
However, Dr. Hussain said the government should have utilised the cheaper available options in funding budget deficit to justify use of the taxpayers' money.
There is more than US$19 billion worth of unutilised committed foreign aid in the pipeline.
The net foreign borrowings in the last fiscal year amounted to Tk 32.62 billion against the target of Tk 126.12 billion.
"Banking sources have adequate liquidity over the last few years. So this was also a cheaper option than the national savings tools," Dr. Hussain said.
Dr. Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh (PRI), said increased reliance on non-bank borrowing raises the debt-servicing costs.
The interest payment alone is the largest part of government expenditure at 23 per cent, followed by education at 15 per cent.
Dr. Mansur said this would have been much higher had the government's deficit reached its target at 5.0 per cent of the Gross Domestic Product.
As per revised estimate, budget deficit (excluding grants) for FY14 was to reach 5.0 per cent of GDP.
But the deficit stood at 3.7 per cent (including grants).
Dr. Mansur observed that the government's projections should be much more realistic and it should reduce dependence on non-bank sources for funds.
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