Domestic borrowing short of FY24 target

The government's domestic borrowing fell significantly short of its annual target last fiscal year primarily due to the central bank's efforts to curb inflationary effects on the economy.
The Bangladesh Bank is implementing a tighter monetary policy, leading to a reduction in its share of government treasuries by 4.0 percentage points, bringing it down to 23 per cent in fiscal year 2024.
Central bank statistics show the total net domestic borrowing from both banking and non-banking sources reached just over 60 per cent of the annual target for FY2023-24.
Officials concerned told the FE that the Bangladesh Bank did not engage in devolvement-neither on its own nor through primary dealer banks-following instructions from the International Monetary Fund (IMF).
It, therefore, resulted in a drop in government borrowing.

"There was no devolvement from the Bangladesh Bank's side, and we didn't encourage primary dealer banks to do so either," said a central banker familiar with the situation on Saturday.
Devolvement, which is akin to printing money, can lead to higher inflation in the economy.
The government had set a borrowing target of Tk 1.56 trillion from domestic sources for the fiscal year ending in June 2024.
However, by the end of June, actual borrowing stood at Tk 947.41 billion, representing 60.5 per cent of the target set in the national budget.
This marks a sharp decline compared to the previous fiscal year that witnessed borrowing of Tk 1.273 trillion or nearly 91 per cent of the target.
Net borrowing from the banking system during the July-June period of FY24 was Tk 826.09 billion or 53 per cent of the target, down from Tk 1.198 trillion during the same period in FY23.
Meanwhile, net borrowing from non-banking sources increased at Tk 121.32 billion during FY24 compared to a rise of Tk 75.31 billion in FY23.
Development spending was also significantly lower at Tk 970 billion by the end of April, or the first 10 months of the fiscal year, against a massive target of Tk 2.6 trillion for FY24.
Revenue mobilisation up to May 2024 saw a rise of more than 14 per cent to Tk 3.28 trillion with a target of Tk 4.1 trillion by the end of June 2024.
However, bankers have welcomed this reduction in government borrowing, noting that it provides them with more room to invest.
They also highlighted potential challenges ahead, particularly liquidity shortages in Shariah-based banks.
Syed Mahbubur Rahman, managing director and CEO of privately-owned commercial bank - MTB - says the reduction in government borrowing was positive news for the banking sector.
"It allows us to invest the money in other productive sectors," he told the FE.
"While it's true that investment in government bills and bonds is safe and risk-free, it does take time to recover funds," he commented.
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