Govt\\\'s borrowing from banks this fiscal to reach a new low

Public-sector borrowing from the country's banking system in the current fiscal year has hit a new low, primarily due to the slump in world oil prices and a slow pace of domestic development works.  
Sources said the government until recently was not required to borrow much from the banking system as oil-marketing operations of the state-owned Bangladesh Petroleum Corporation (BPC) turned profitable for the first time in many years besides the slow pace of Annual Development Programme (ADP) implementation.
Besides, the sale of the government's savings tools has been unusually high because of higher yields of the same compared to the rates of interest offered by banks on term-deposits. This has also resulted in the decline in government's borrowing from the banks and other sources.    
As such, the public-sector credit growth is set to be lowest in five years after 2010.
The growth of credits to the public sector stood at a negative -0.5 per cent up to February (July-February), according to calculations done by the World Bank (WB).
It was nearly 13 per cent in the same period in last fiscal year (2013-14), the WB data showed.
There was a projection of public credit growth at 7.6 per cent for the whole of this financial year (FY).
The growth of credits to the public sector consisting of government and public entities turned negative at 1.7 in 2010.
At that time, external aid had helped the government borrow less from domestic sources: bank and non-bank financial outfits.
The execution of programmes under the development budget stood up to 43 per cent in nine months to end of March.
The government, however, has revised the ADP downward through cutting down the outlay by more than Tk 50 billion amid slow implementation.
Still, there is scepticism that the ADP implementation may stand much lower this fiscal.
However, economists said the lesser borrowing would have appeared as a piece of good news if the government's revenues had surged apace with the growing expenditures.
Rather, saving certificates are meeting the gap between revenue and expenditure rises.
The economists viewed that the spontaneous purchase of saving certificates by people, mostly the elderly, is bleeding the exchequer.
Interest payments are believed to claim the highest allocation of 18.4 per cent, in the current year's revenue budget, and it will go on ballooning further.
It is expected that higher yields from the saving certificates may result in the net sales of the instruments to the tune of Tk 270 billion at the end of the fiscal year, if the present trend continues, the economists forecast.
The original projection of sales was worth Tk 90 billion.
They were also critical of the government stand against revising the prices of petroleum products in keeping with the international rock-bottom rates.
Such government position is making the state-owned Bangladesh Petroleum Corporation (BPC) into a profitable concern by default, they said.
Fuel subsidies have effectively turned negative. As such, the oil windfall has been
accruing entirely to the coffers of BPC, which has now started garnering profit-for the first time since FY1999.
"Whereas the government did not pay much both for fresh purchases and subsidies, so a large amount had been saved," said Dr Zahid Hussain, the lead economist at the Dhaka office of the World Bank.
BPC took only Tk 6.0 billion out of Tk 24 billion subsidy kept for the state corporation for the current fiscal year.
Ever since global fuel prices went on a downturn in mid-2014, domestic fuel prices have not been adjusted, forcing people to pay much higher on top of the international prices.
Dr Hussain, on the other hand, said there is need for reducing the rates of yield on the saving certificates as higher sales of the instruments are building up a huge liability burden on the government's back.  
"Borrowing through the saving instruments is always expensive and the government had to pay for it," Dr Hussain said.
He said there is no instrument to discourage people but reducing the interest rates on the certificates-mostly as high as 13 per cent.
Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh (PRI), said government borrowing has fallen also as the BPC is in profit domain.
"Government had to manage money for procuring fuels, so now the government is not feeding the lone fuel-importing organ," he said.
Also, Bangladesh Chemical Industries Corporation is taking lesser dollops of state funding as the prices of fertilisers on the international market are on a downturn too.
Subsidy spending earmarked for the Bangladesh Jute Mills Corporation (BJMC) also fell in the current financial year.
Meanwhile, the public borrowing figures were -1.7 per cent in 2010, 33.7 per cent in 2011, 19.7 per cent in 2012, 10.8 per cent in 2013 and 8.9 per cent in 2014 fiscal years.
jasimharoon@yahoo.com