Bank Loans to Government Exceed One Trillion in Nine Months

The government’s reliance on bank borrowing has intensified significantly as revenue collection continues to fall short of expectations. Faced with persistent fiscal pressure, authorities have been compelled to depend on loans to meet routine expenditures, including salaries, interest payments, and subsidies. Within just nine months of the current fiscal year, borrowing from the banking system has already exceeded the full-year target.

According to official data, the government had planned to borrow 1.04 trillion taka from the banking sector over the entire fiscal year. However, by the end of March, covering the July to March period, total borrowing had reached 1.089 trillion taka, surpassing the annual target well ahead of schedule.

Government Borrowing Overview (July–March)

The sharp rise in borrowing reflects the government’s struggle to manage expenditure amid weak revenue inflows. In late March, the government exceeded its monthly borrowing ceiling and was forced to seek additional funds from the central bank. This required monetary expansion, often referred to as “printing money,” to address short-term liquidity shortages. Although the excess borrowing was repaid within a short period, limiting its immediate impact, such practices carry inflationary risks if used repeatedly.

Economists warn that central bank financing increases reserve money, which can fuel inflation by expanding the overall money supply. On the other hand, excessive borrowing from commercial banks may crowd out private sector credit, reducing access to finance for businesses. This can slow investment, hinder industrial growth, and weaken employment generation.

The broader fiscal situation remains challenging. The national budget is estimated at around 8 trillion taka, with approximately 5 trillion taka expected from tax revenues. However, revenue collection has underperformed significantly. During the first nine months of the fiscal year, the shortfall in tax revenue reached approximately 1 trillion taka, marking a record deficit. Weak economic activity has further limited revenue growth prospects.

Under the revised budget framework, tax authorities are required to collect approximately 2.15 trillion taka during the final quarter from April to June. This implies an average monthly collection target of over 717 billion taka, which analysts consider highly ambitious given current economic conditions.

Borrowing Trends in April

There are signs of partial improvement in April, as the government has reduced its borrowing levels:

This reduction suggests an effort to ease pressure on the financial system and contain inflationary risks.

Risks and Policy Priorities

Sustained high levels of borrowing create multiple economic challenges. Rising public debt increases the government’s interest burden, which has become one of the largest components of public expenditure. This limits fiscal space for critical sectors such as education, healthcare, infrastructure, and social protection.

Policy experts recommend several measures to address the situation. These include expanding the tax base, strengthening tax compliance through digitalisation, reducing non-essential expenditure, prioritising development projects, and exploring alternative financing sources such as bonds and concessional external loans. Reforming state-owned enterprises to reduce subsidy dependence is also considered essential.

Without meaningful structural reforms, continued reliance on bank borrowing could intensify inflationary pressures, restrict private sector growth, and undermine overall economic stability in the years ahead.