During the first two months in FY26, the government repaid Tk 3,105 crore to Bangladesh Bank while borrowing only Tk 588 crore from commercial banks, leaving net borrowing from the banking system at negative Tk 2,516 crore.
It was revealed in a recent data of the central bank.
The government set a target of Tk 1,04,000 crore in net borrowing from the banking system to finance its deficit in FY26.
Bankers said that the government has been cautious about heavy borrowing from commercial banks, which typically requires issuing treasury bills and bonds at higher rates.
The central bank targeted to reduce inflation to 7 per cent by December, therefore, avoid issuing high powered money.
Moreover, borrowing from commercial bank was expensive and it increases interest burden.
Rather, it preferred borrowing from foreign lenders at low costs.
However, BB officials said that the borrowing would increase in the upcoming days as the government was preparing for holding the national election.
Government borrowing trends in the previous fiscal year highlight a shift in financing strategies.
In FY25, borrowing from the banking system fell to Tk聽72,372 crore, down sharply from Tk 94,282 crore in FY24 and far below the Tk 99,000 crore target.
It was the lowest level of bank borrowing in four years, compared with Tk 1,22,980 crore in FY23 and Tk 72,750 crore in FY22.
The decline was attributed to a surge in foreign loan inflows, which reduced the need for heavy domestic borrowing.
Even so, borrowing from commercial banks rose significantly in FY25.
The government borrowed Tk 1,36,369 crore from commercial banks while repaying Tk 63,997 crore to Bangladesh Bank, effectively reducing reliance on central bank financing.
Bankers explained that the shift toward commercial banks was driven by the high yields on treasury instruments at that time.
Treasury bill rates had exceeded 11 per cent, and bond yields hovered around 12 per cent, offering banks lucrative investment opportunities at a time when private sector credit growth was slowing.
With limited appetite for lending to businesses due to economic uncertainty, banks preferred government securities as safe investments.
By the end of FY25, private sector credit growth had slowed to 6.49 per cent, reflecting waning business confidence.
Inflation, however, eased to below 9 per cent in June after persisting above that level for 27 consecutive months, providing some relief to monetary policymakers.
During the reporting period, the government borrowed Tk聽7,600 crore from the non-banking sources through treasury bills and bonds.
Besides, it borrowed a total of Tk 5,084 crore from the domestic sources excluding net position in national savings certificates account.
