Net domestic borrowing ostensibly down in seven months

Government's net domestic borrowing ostensibly decreased deeply by 65 per cent in the first seven months of the current fiscal year, although gross debt could be much higher.

Data from the Bangladesh Bank, the central bank, show that from July to January, the government net domestic borrowing  was Tk 149.1 billion in a decrease by more than 65 per cent from the same period a year earlier. During July-January of FY 2023 the borrowing was recorded Tk 427.17 billion.

Net borrowing during the period under review was recorded at Tk 62.08 billion while another chunk of Tk 87.01 billion came from non-bank borrowing, according to the central bank statistics.

Banking sources  include Bangladesh Bank and scheduled banks while non-banking sources include net sales of savings instruments and T-bills & T-bonds held by nonbank financial institutions (NBFIs), insurance companies, individuals and so.

Economists and central bankers say the net borrowing has fallen but the gross borrowing was huge with repayments to the banking system taken into account.

However, they have found revenue mobilisation by tax authority as  good to meet much of the need for budget financing.

Provisional data from the National Board of Revenue (NBR) show that all of its three wings -- customs, value-added tax (VAT), and income tax -- collected 15-percent higher tax year on year in the July-January period of the fiscal year 2023-24, amounting to Tk 1.98 trillion.

The NBR has a revised tax-collection goal of Tk 4.1 trillion for FY24. It managed to log 48 per cent of the target in the seven months to January.

One central banker says the government is borrowing and repaying the debts and it results in reduction in the net borrowing from the domestic sources.

"Government is borrowing to meet the liabilities of the matured bonds and bills," he told the FE correspondent, on condition of anonymity.

He, however, hinted that the private- sector borrowing is increasing--the growth recorded 9.96 per cent in February.

Dr Zahid Hussain, an independent economist of Bangladesh, told the FE that the budget financing from borrowing is comparatively lower due to an around 15-percent growth in revenue mobilisation.

But he guesses that the gross borrowing by government is huge which goes for repaying earlier borrowings.

"February and March borrowings were also higher as the government treasury bills and bonds' rates are jumping each month," he said.

 Government domestic borrowing has initially been targeted at Tk 1.55 trillion in the national budget for FY24. Of this, borrowing from the banking system was targeted at Tk 1.32 trillion, 230 billion (including Tk. 180 billion through net sales of National Savings Schemes) from non-bank domestic sources.

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