Government domestic borrowing from the banking sector has risen markedly in the first six months of the 2025–26 fiscal year, reaching BDT 53,386 crore. The sharp increase places the borrowing well above half of the annual target, signalling mounting pressure on public financing amid persistent expenditure needs and relatively subdued revenue mobilisation.
According to the latest data released by the Bangladesh Bank, total net domestic borrowing by the government during the July–December period stood at BDT 62,246 crore. The overwhelming share of this borrowing originated from the banking system, while contributions from non-bank financial institutions and national savings instruments remained comparatively weak.
The data highlights a significant structural shift in the government’s borrowing pattern. Bank borrowing expanded rapidly, while reliance on non-bank sources and savings certificates declined. Economists interpret this as a reflection of changing market conditions, including interest rate dynamics, reduced attractiveness of savings instruments, and shifting investor behaviour.
Government Domestic Borrowing Overview (First Half of FY 2025–26)
| Source of Borrowing | FY 2025–26 (July–Dec) | FY 2024–25 (July–Dec) | Change |
|---|---|---|---|
| Bank borrowing | BDT 53,386 crore | BDT 6,740 crore | ~8-fold increase |
| Non-bank financial institutions | BDT 8,861 crore | BDT 24,688 crore | BDT 15,827 crore decrease |
| National savings instruments (net) | BDT 2,461 crore | Lower baseline | Modest increase |
| Total domestic borrowing | BDT 62,246 crore | BDT 31,428 crore | Nearly doubled |
The comparison with the same period of the previous fiscal year is particularly striking. Bank borrowing has increased almost eight times year-on-year, driven primarily by higher fiscal expenditure pressures, including public sector wages, subsidy requirements, and ongoing development project financing.
In contrast, borrowing from non-bank financial institutions has contracted significantly. Similarly, net inflows from savings certificates have remained subdued. Analysts attribute this decline to lower real returns on savings instruments and increased competition from alternative investment avenues.
For the full 2025–26 fiscal year, the government has set an overall domestic borrowing target of BDT 125,000 crore. Of this, BDT 104,000 crore is expected to be raised from the banking sector, while BDT 21,000 crore is projected from non-bank sources.
Economists note that the current surge in bank borrowing has not yet created immediate pressure on private sector credit, largely due to relatively weak investment demand. However, they caution that this balance could shift if private investment activity strengthens. In such a scenario, increased competition between the government and private borrowers for bank funds could lead to upward pressure on interest rates and tighter credit conditions for businesses.
Overall, the growing reliance on bank-based financing underscores a deepening structural dependence on the domestic banking system. This trend may have significant implications for monetary stability, interest rate trajectories, and the broader investment climate in the months ahead.