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The government has slashed its bank borrowing target by 28 per cent, or Tk 385 billion, for this fiscal year, due to lower expenditures and slower implementation of the Annual Development Programme (ADP).
Under the revised target, the government will borrow Tk 990 billion instead of Tk 1375 billion by the end of June 2025 from the country's banking system, officials said.
Meanwhile, the central bank estimated that the government's bank borrowing may reach maximum Tk 900 billion by the end of the current fiscal year (FY), 2024-25.
"We've estimated the government's borrowing from the banking system for the ongoing FY'25 considering previous trends of such borrowing," a senior official of the Bangladesh Bank (BB) told the FE on Wednesday.
He also said the central bank has finalized its monetary and credit projections including private sector credit growth ceiling for the second half (H2) of the FY'25 considering the government's revised bank borrowing target.
Meanwhile, the central bank has kept its private sector credit growth target unchanged at 9.80 per cent for the second half (H2) of the FY'25 despite falling trend of such credit growth recent months.
The growth in credit flow to private sector came down to 7.28 per cent in December 2024 on a year-on-year basis from 7.66 per cent a month before.
It was 2.52-percentage-point lower than the central bank target of 9.80 per cent for the H1 of the current fiscal year.
"There will be no shortage of funds in the market if private sector credit growth meets the target by the end of this fiscal year," the central banker said while replying to a query.
He believes that the private- sector-credit growth may increase in the coming months as import has already taken an upturn ahead of the Hole Ramadan.
"The government has cut its bank borrowing target mainly due to lower implementation of the ADP during the July-December period of the FY'25," a senior official familiar with the government debt-management activities told the FE.
Nearly 18 per cent of the ADP was implemented in the first six months of this fiscal year, down 4.51 percentage points from the 22.48 per cent implementation rate in the same period of the FY'24, due mainly to some factors including political unrest.
Besides, comparatively less operational expenditures of the interim government has helped slashing its bank borrowing target for the FY'25, the official explained.
Talking to the FE, a senior executive of a leading private commercial bank (PCB) said the government's latest move will help reduce its bank borrowing costs.
"The flow of liquidity will be increased in the market following lower bank borrowing target of the government for the FY'25," the private banker said.
He also said interest rates on both lending and deposit are expected to fall in the near future on the same ground.
On the other hand, the government borrowed more than Tk 689 billion from banks in the first seven months of this fiscal for deficit financing but its net borrowing stood at nearly Tk 136 billion after repayment.
The ministry of finance borrowed Tk 689.31 billion from all the scheduled banks through issuing treasury bills and bonds upto January 30 of this fiscal year while Tk 553.60 billion was paid to the central bank, according to the central bank's latest report on government borrowing from the banking system.
However, the net bank borrowing of the government was deficit Tk 5.11 billion in the same period of the FY'24, according to the official figures.
Meanwhile, he outstanding figures of ways-and-means advances (WMAs) facility stood at Tk 106.27 billion while overdraft (OD) drawing facility was zero.
The government is now empowered to borrow up to Tk 120 billion from the central bank under the WMAs to meet its day-to-day spending without issuing any securities.
In addition, it is entitled to borrow a maximum of Tk 120 billion through OD drawing facility from the central bank for the same purpose.