The interim administration has markedly increased its dependence on the domestic banking sector, borrowing more than Tk73,000 crore during the first seven months of the 2025–26 fiscal year to finance development projects and recurrent expenditures. The trend, highlighted in a recent report by Bangladesh Bank, underscores mounting fiscal pressures and shifting borrowing patterns.
Between July and January, total net government borrowing—both domestic and foreign—amounted to roughly Tk90,000 crore. Of this, an overwhelming 81 per cent was sourced from the internal banking system, signalling a pronounced tilt away from alternative financing channels.
Economists have raised concerns that such heavy reliance on bank borrowing could crowd out private sector credit, dampening investment at a time when business confidence is already fragile. With political uncertainty intensifying ahead of the 13th national elections, private sector credit growth has slowed to historically low levels, further compounding risks to economic momentum.
Central bank officials attribute the surge in borrowing to several factors. A significant portion stems from government support for the newly consolidated “Combined Islamic Bank,” created through the merger of five financial institutions. In early December, the government injected approximately Tk20,000 crore into the entity, much of which was financed through additional borrowing from banks.
At the same time, revenue collection has fallen short of expectations during the first half of the fiscal year, while public expenditure—particularly operational costs—has continued to rise. This mismatch has forced the government to rely more heavily on domestic lenders.
The fiscal framework for 2025–26 projected a budget of Tk7.90 lakh crore, with an overall deficit of Tk2.21 lakh crore (equivalent to 3.5 per cent of gross domestic product). To bridge this gap, policymakers planned to mobilise Tk1.25 lakh crore from domestic sources, including Tk1.04 lakh crore from banks and Tk21,000 crore from non-bank instruments. However, actual borrowing trends reveal a stark divergence from these targets.
Key Borrowing Indicators (July–January)
| Indicator | FY2025–26 | FY2024–25 (same period) |
|---|---|---|
| Net borrowing from banks | Tk73,035 crore | Tk9,442 crore |
| Borrowing from non-bank sources | Tk7,216 crore | Tk25,864 crore |
| Net foreign borrowing | Tk9,832 crore | Tk27,964 crore |
| Total net borrowing | ~Tk90,000 crore | — |
The data shows that bank borrowing has surged nearly eightfold compared with the same period a year earlier, while non-bank financing has dropped sharply. External borrowing has also declined significantly, contributing less than 11 per cent of total loans.
Meanwhile, the overall stock of domestic public debt rose to Tk10.37 lakh crore by January 2025, reflecting an annual increase of more than Tk1.51 lakh crore.
Financial analysts stress the importance of rebalancing the government’s debt strategy. Greater diversification—particularly through enhanced revenue mobilisation and increased access to external concessional financing—could help ease pressure on the banking sector, safeguard private investment, and support long-term macroeconomic stability.