A fall in sales of savings certificates along with slow revenue collection has forced the government into heavily taking loans from banks in order to pay expenses.
The government’s borrowing exceeded half the target for the whole fiscal year in only one and a half months.
The amount, Tk 237.61 billion, is close to the Tk 264.46 billion total of the last fiscal year.
“Revenue collection has slowed down. Stricter rules and tax hikes have also led to a drop in savings certificates sales. So, the government is forced to borrow from the banks to pay the expenses,” researcher Zaid Bakht said.
If the sluggishness persists in revenue collection, he believes, government borrowing will rise further.
“Private sector’s share of loans will shrink in that case and it will negatively impact investment,” he said.
Bakht thinks the government’s dependency on borrowing increased following a rise in expenditure due to large projects like Padma Bridge, Dhaka Metro Rail, and Rooppur Nuclear Power Plant.
Of the loans taken by the government this fiscal year until August 15, the Bangladesh Bank provided Tk 64.39 billion while the remaining Tk 173.23 billion came from the commercial banks.
These have taken the total government borrowing to over Tk 1.31 trillion.
The government had not borrowed much from the banks in past few years and even repaid more than what it took in some years.
But things started to change with the National Board of Revenue (NBR) collecting Tk 2.23 trillion after revising down revenue target in the last fiscal year to Tk 2.8 trillion.
It has not yet published this year’s data even though around two and a half months have passed.
An official anonymously said though revenue collection has grown, the board has missed the target for this period.
Meanwhile, data from the National Savings Directorate suggest savings certificates worth Tk 21.6 billion were sold in July, which is less than half the amount sold in the same month last year.
The government has doubled the tax at source on interest earnings from savings certificates to 10 per cent for investments of more than Tk 500,000 this fiscal year.
© 2017 - All Rights with The Financial Express