Bank borrowing by the government has surged significantly over a short period, raising concerns among economists and market analysts about fiscal sustainability and potential pressure on the financial sector, according to central bank data.
In the first one and a half months of the current administration, government borrowing from the banking system reached nearly Tk 41,000 crore. Over the broader three-month period, including figures associated with the interim administration led by Muhammad Yunus, total bank borrowing stood at approximately Tk 56,000 crore. Analysts note that this sharp acceleration has taken place primarily to meet operational expenditure amid widening revenue shortfalls.
Data from the central bank indicate that in the nine months of the current financial year, total government borrowing from banks has already reached around Tk 109,000 crore, surpassing the full-year target. The trend reflects growing fiscal pressure as expenditure continues to rise while revenue mobilisation remains weak.
Key Fiscal Indicators
| Indicator | Period | Amount (Tk crore) | Remarks |
|---|---|---|---|
| Government bank borrowing | Last 1.5 months | 41,000 | Rapid short-term rise |
| Government bank borrowing | Last 3 months | 56,000 | Includes interim period |
| Total bank borrowing | 9 months (FY) | 109,000 | Exceeds annual target |
| Revenue shortfall | 8 months | 71,500 | Persistent deficit |
| Total borrowing increase | 14 months | ~175,000 | Post-political transition period |
| Bank sector capital gap | Recent estimate | 282,000 | Across 23 banks |
Economists attribute the rising reliance on bank financing to a combination of weak revenue collection, subdued investment activity, and persistent inflationary pressures that have dampened consumer demand. The resulting slowdown in economic activity has further constrained tax receipts, widening the fiscal gap.
At the same time, government expenditure has remained elevated, with additional pressure stemming from global energy market volatility and geopolitical tensions in the Middle East. As a result, authorities have increasingly turned to domestic banks to finance budgetary obligations.
The rapid pace of borrowing has intensified concerns within the financial sector. Analysts warn that excessive government reliance on bank credit could crowd out private sector lending, potentially restricting investment and slowing economic growth.
Speaking on the issue, a senior fellow at a leading policy research institute, Dr Mostafizur Rahman, cautioned that avoiding a debt trap should be a central policy priority. He emphasised the need to strengthen revenue mobilisation rather than relying heavily on domestic borrowing to bridge fiscal gaps.
Business leaders have also expressed concern. The president of a major exporters’ association noted that sustained government borrowing from banks risks undermining the broader economy and may eventually create repayment pressures for the state itself. Similarly, representatives from a leading chamber of commerce highlighted ongoing liquidity constraints in the banking sector, pointing out that regulatory tightening has already limited private access to finance in several institutions.
Central bank figures further show that since August 2024, bank credit to the government has increased by nearly Tk 175,000 crore, underscoring the scale and speed of fiscal expansion financed through the banking system.
Economists continue to caution that without structural improvements in revenue collection and expenditure management, the current trajectory could place additional strain on both fiscal stability and the wider financial system.