The government’s net borrowing from commercial banks decreased in the 2024–25 financial year compared with the previous fiscal year, driven largely by a surge in foreign loan inflows.
According to Bangladesh Bank data, borrowing dropped to Tk 72,372 crore in the July-June period in FY25, significantly lower than Tk 94,282 crore in the same period of FY24.
The borrowing was lowest in four years. The government had borrowed Tk 1,22,980 crore in FY23 and Tk 72,750 crore in FY22.
The overall net borrowing from the banking system also fell short of the target.
For FY25, the government had set a borrowing target of Tk 99,000 crore to finance its budget deficit.
Bangladesh Bank officials attributed the reduced domestic borrowing to significant foreign loan receipts at the end of the fiscal year.
In the final week of June alone, the government secured around $5 billion from the IMF, World Bank, ADB, JICA, AIIB, and other development partners. These inflows allowed for substantial end-of-year adjustments.
Although the government›s overall bank borrowing remained below the target, borrowing from commercial banks increased notably. In the reporting period, the government borrowed Tk 1,36,369 crore from commercial banks.
During this time, the government repaid Tk 63,997 crore to the Bangladesh Bank, reducing reliance on direct central bank financing.
Bankers said that the surge in government borrowing from commercial banks stemmed from the attractiveness of treasury instrument.
Treasury bill rates have exceeded 11 per cent, while bond yields hovering at 12 per cent, making them lucrative investments.
Some banks, restricted from lending to businesses due to financial instability, redirected their funds into government securities.
The central bank had barred several institutions from issuing fresh loans after uncovering extensive irregularities, which left them struggling to repay depositors.
Additionally, many banks faced a lack of viable investment opportunities given the country’s current economic uncertainty.
Despite this liquidity, banks’ overall lending capacity weakened due to high levels of non-performing loans, increasing deposit withdrawals and rising cash circulation outside banks amid persistently high inflation.
Private sector credit growth fell to 6.95 per cent in May, indicating declining confidence in the economy.
Inflation dropped below 9 per cent in June after 27 months.
This prolonged inflationary pressure has severely impacted fixed-income households, forcing many to withdraw savings to cover rising living costs.
While this has helped meet the government’s borrowing needs, it has also restricted credit flow to businesses.
The steady rise in borrowing reflects increasing expenditures and revenue shortfalls, further complicating the country’s economic challenges.
