People familiar with the financial market hold the view that such divergence from banking to non-banking sources is impacting development in the debt-market. They also said such type of negative borrowing also highlights the fact that the government is losing its space for development works for repayment of huge debts.
Public-sector net borrowing from the banking system dwindled into negative territory during the July-December 2016 period of this fiscal as the repayment is higher than that of fresh borrowing. Its net borrowing was also negative in the last fiscal year 2015-16 in comparison with the same period a year before.
Financial experts in banking sector blame it for higher inflow of cash from the non-bank sources like the national savings certificates. Besides, the growth in NBR tax mobilisation remained positive. The government planned to borrow (Net) Tk 398.38 billion from the banking system. It has a plan to repay Tk 1.03 trillion this fiscal year for debt servicing from the banking system received as long and short-term debts earlier.
Finance Ministry officials believe that borrowing might rise in the coming months to June as there will be a significant revenue shortfall. They eye around a Tk 440 billion worth of shortfall this fiscal year. On the other hand, the government borrowing from the non-banking sources stood markedly higher at Tk 243.02 billion during July-December as against that of July-December 2015.
A lesser reliance on funds from banks will further put the banking sector in trouble as it already has a record surplus of over Tk 100 000 crore lying idle – up from Tk 35 000 crore in 2009. It indicates that the economy, while not in a recession, is stagnant due to a lack of investment. This is no surprise, despite a stable political climate. But shortage of infrastructure investment is preventing private sector growth. Firms still can’t get uninterrupted electricity despite paying higher prices. Roads and highways are being enlarged at an abysmally slow pace.
There are also other reasons for the woes of the banking sector. Finance from non-banking sectors is increasing all over the world-and not just in Bangladesh. For big companies it is relatively easy to get finance from this method. For SMEs, there is no hope but to rely on the banking sector but they are also worrying about the slow levels of growth of demand in the economy. So when the public debt is rapidly rising its servicing liability will grow faster to slow down the pace of economic growth.
