Govt's bank borrowing soars ahead of polls

AKM Zamir Uddin

The government has started borrowing heavily from banks in November after holding back in the previous three months to meet its growing cash requirement ahead of the national election in the next month. In the first 27 days of the month, the government borrowed Tk 3,042 crore from commercial banks, according to data from the Bangladesh Bank.

In contrast, Tk 1,373 crore was borrowed between the months of July and October. Last month, it did not borrow any amount but repaid Tk 1,163 crore to banks to adjust its previous debts.

The government initially set a net borrowing target of Tk 1,042 crore from banks for this November but it later revised the amount, keeping an option to borrow another Tk 2,000 crore.

There is no particular reason for the sudden spike in government borrowing this month other than the growing cash requirement centring the upcoming parliamentary election, experts and bankers said.

The government might spend its borrowed money to implement its election-centric programmes, said AB Mirza Azizul Islam, a former finance adviser to a caretaker government.

“I do not see any large amount of emergency cash requirement for the government right now but only election-oriented needs.”

The government will try to implement its annual development projects as much as possible before the election, which might be one of the core reasons for the sudden borrowing, Islam said.

Between the months of July and September, the government failed to achieve its targeted revenue collection, which might have fuelled bank borrowing, he said.

The borrowing spree will go on in December as it is the election month, said a BB official.

The banking sector is facing a cash crunch in recent months and the crisis may be exacerbated by the huge government borrowing from banks, said Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh, a platform of the private banks' chief executives.

The implementation of the annual development programme is the main reason for the hike in government borrowing, said Rahman, also the managing director of Dhaka Bank.

The government has set a bank borrowing target of Tk 42,029 crore for fiscal 2018-19 to finance the budget deficit.

Last fiscal year, the government borrowed only Tk 5,666 crore from the banking sector against the target of Tk 28,203 crore.

• Courtesy: The Daily Star /Business/ Nov 28, 2018