Despite higher repayments of previous debts, the government's domestic borrowing from the banking system witnessed a positive growth in July-October of FY25, compared to the same period in FY24, according to a latest Bangladesh Bank (BB) report.
The increase is attributed to higher financing through government securities.
At the same time, borrowing from non-bank sources also surged significantly during this period, driven by robust net sales of National Savings Certificates (NSCs).
For FY25, the government set its domestic borrowing target at over Tk 1.60 trillion in the national budget.
This includes Tk 1.37 trillion from the banking system and Tk 234 billion from non-banking sources, of which Tk 154 billion is expected to come from net sales of national savings schemes.
To implement the budget, the government mainly borrows from two domestic sources - banking and non-banking systems.
Banking sources include the Bangladesh Bank and scheduled banks, while non-banking ones are net sales of savings instruments, T-bills, and T-bonds held by non-bank financial institutions (NBFIs), insurance companies, individuals, and so on.
Between July and October of FY25, net borrowing from the banking system stood at Tk 172.80 billion, representing 12.6 per cent of the annual target.
This marks a significant turnaround from the same period in FY24 when the government repaid a net Tk 37.03 billion to the banking system.
In the said period, the government borrowed over Tk 168.30 billion from different institutions and individuals other than banks by issuing T-bills and T-bonds.
Moreover, the sales and principal repayments of national savings schemes stood at Tk 208.50 billion and Tk 157.42 billion, respectively, in this period, resulting in Tk 51.07 billion net sales of national savings schemes.
Thus net borrowing from non-banking sources was Tk 219.38 billion during the period under review.
The government's total net domestic borrowing - combining both banking and non-banking sources - reached Tk 392.18 billion during the first four months of FY25, accounting for 24.4 per cent of the annual target.
This is a significant rise compared to the Tk 22.95 billion borrowed during the same period in FY24.
The net sales of national savings schemes showed a marked improvement, amounting to Tk 51.07 billion in July-October of FY25. This is a sharp reversal from the same period in FY24, which saw a net repayment of Tk 23.05 billion in this category.
Dr M Masrur Reaz, chairman of Policy Exchange of Bangladesh, highlighted that the government's elevated domestic borrowing is primarily driven by revenue shortfalls and high inflation.
He attributed these challenges to the July-August uprising, double flooding, and supply chain disruptions.
"We anticipate sluggish revenue collection in the coming months," he said, adding these factors have also negatively impacted domestic revenue collection.
Reaz emphasised the need for reforms to broaden the domestic revenue base, suggesting that some existing tax exemptions are no longer necessary.
"Expanding the revenue base requires comprehensive reforms, but it is essential for sustainable fiscal management," he stated.
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