Government’s bank borrowing exceeds target by Tk 1 lakh crore at fiscal year-end

Economy Desk

According to Bangladesh Bank data, in the closing days of FY2025, the government has borrowed Tk 99,591 crore from the banking sector, surpassing the annual target of Tk 99,000 crore. To address revenue shortfalls, the government is increasingly relying on bank loans, even though most banks in the country are already facing liquidity crises.

Central bank data shows that in this fiscal year, the government has taken loans of Tk 1.22 lakh crore from scheduled banks while repaying Tk 22,769 crore to the central bank. As a result, the net borrowing stands at Tk 99,591 crore.

Bankers have stated that government borrowing has increased due to declining revenue collection and reduced private investment.

They say that after the fall of the Awami League government at the beginning of this fiscal year, law and order deteriorated in the country. During this time, businesses refrained from new investments, prompting banks to invest more in government treasury bills and bonds.

According to Bangladesh Bank data, this is the second time the government has exceeded its annual bank borrowing target. Previously, in FY2023, the borrowing target was Tk 1.15 lakh crore, but the government borrowed Tk 1.19 lakh crore.

Although the government imposed additional duties and taxes on various goods and services mid-year, it failed to achieve the expected revenue collection.

On the other hand, in some previous fiscal years, the government repaid more than it borrowed from banks and relied more on non-banking sources like savings certificates.

Economists’ Concerns

Dr. Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), said, “The government is borrowing more from banks due to revenue shortfalls. Our tax-to-GDP ratio is very low—there is no alternative but to improve it. Failure to meet revenue targets will limit private sector access to credit, which is harmful for the banking sector already facing liquidity issues.”

She recommended strengthening tax administration, expanding the tax net, and increasing automation and technology use.

Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank, said, “Excessive government borrowing sends a negative signal for the economy. It reduces bank liquidity and limits private sector credit access, hindering investment and employment. Although private sector credit demand is currently low, if banks cannot lend in the future, interest rates and inflation will rise.”

He added, “Many banks are already facing liquidity crises, with non-performing loans at around 25% of total loans. If government borrowing increases next fiscal year, the private sector will suffer further. This is not a sustainable solution.”