13 days ago

Government debt snowballs to Tk 13.60t for deficit financing

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Aggregate government debt liabilities snowballed to approximately Tk 13.60 trillion as of last December, according to latest official data on borrowings from internal and external sources for deficit financing.

The increase in current fiscal's first-half debt burden was Tk. 0.22 trillion.

In percentage terms, it reflects a six-month increase of 1.6 per cent in December of the current fiscal 2022-23, a report prepared by the finance division shows.

Of the total public debts, domestic borrowing was Tk 8.64 trillion and external Tk 4.96 trillion.

The debt-to-GDP burden, however, looks down at 30.56 per cent at the end of December against 32.38 per cent at the end of June 2022, in proportion to ramped-up gross domestic product.

The reason behind the fall of the debts in terms of the gross domestic product or GDP is that the GDP for the last fiscal year was Tk 39.72 trillion while the debt figures up to December 2022 had been calculated on GDP figures estimated for the current 2022-23 fiscal year. The GDP for FY 2023 is approximately Tk 44.50 trillion.

The report says: "The total debt-to-GDP ratio was around 30.56 per cent based on GDP projection for FY23 by BBS and is significantly lower than the IMF threshold of 55 per cent".

According to the official calculations, up to December, the government had raised Tk 4.39 trillion from the banking system: Tk 3.35 trillion through treasury bonds, Tk 862 billion as treasury bills, and the rest Tk 180 billion as Sukuk.

Government debt from nonbank borrowings stood at Tk 4.25 trillion: NSC Tk 3.62 trillion and the rest Tk 627.4 billion from other sources, especially the general provident fund.

However net financing through T-Bill was Tk 92.48 billion in the first half of FY23. The long-term instrument (T-bond) has continued to be the preferred instrument for borrowing.

In the first two quarters of FY23, net borrowings from T-Bond amounted to BDT 161.97 billion.

In the meantime, the net sales of the NSC (national savings certificates) were recorded as negative at Tk 31.07 billion.

The finance report argues: "Various reform initiatives, such as the online issuance process, logical investment limit, and introduction of multi-tier interest rates contributed to reducing the net sales of the National Savings instruments."

The finance ministry mentions that Bangladesh still has access to external concessional financing from multilateral and bilateral partners and prefers this mode of financing.

In the first two quarters, Bangladesh received Tk 270.76 billion from external financing sources.

On interest expenses, the report says in the first half of the FY23 interest expenses borne by the government came to Tk 407.92 billion which is exactly half the amount estimated in the annual budget.

For the domestic part, interest expense was higher than the annual target because higher interest rates for government securities are prevailing on the market.

External interest payments accounted for only 6. 0 per cent of the total government interest expenses.

Domestic debt constitutes the major share of the total debt stock--and financing from domestic sources is increasing gradually.

As on 31st December 2022, domestic and external debts accounted for 64 per cent and 36 per cent of the total debt stock, respectively.

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