Noman Mosharef :
The government’s bank borrowing will rise significantly in the upcoming fiscal year to meet the budget deficit.
Its bank borrowing is set to be Tk 1, 01,818 crore in the budget for the fiscal 2022-23 from Tk 87,288 crore in the revised budget for the current fiscal year (2021-22), according to an estimation of the Finance Ministry.
“The government will have to borrow more from banks in the next fiscal year due mainly to meet rising demands of subsidies and debt servicing. The estimated bank borrowing target is 18.60 per cent higher than the revised target for the current fiscal year,” a finance ministry official told The New Nation on Wednesday on condition of anonymity.
According to the Finance Ministry, salary and allowance payments of the government employees will cost Tk 76,412 crorein the next fiscal year, Tk 80,275 crore in interest payments and Tk 82,745 crore in subsidies, incentives and cash loans.
In the FY22 budget, the government’s bank borrowing target was fixed at Tk 76,452 crore. But it revised to Tk 87,288 crore to meet the government’s increasing expenses.
Dr Zahid Hussain, former lead economist at World Bank’s Dhaka office, said government’s reliance on bank loan to meet budget deficit may have adverse impact on private sector credit flow.
He said the call money rate has risen to 5 per cent amid liquidity crisis liquidity in the banking system. “In this situation, high bank borrowing by the government will make loan costly for private entrepreneurs and thereby, it will fuel inflation further,’ he added.
The size of the next year’s budget has been estimated at Tk 6,77,864 crore. The revenue collection target has been set at Tk 4,33,000 crore. However, the overall budget deficit has been projected at Tk 2,44,864 crore, which is equivalent to 5.5 per cent of the GDP.
The government has set Tk 116,523 crore borrowing target from external sources and Tk 128,341 crore from domestic sources to finance the deficit budget, according to the finance ministry sources.
“We will see an upward trend in government bank borrowing if loans or financial assistance from external sources are not available in line with the projection,” said a senior executive of a private bank, adding, “Liquidity pressure on the money market will grow if the government’s bank borrowing continue to rise.”
