Government borrowing from the banking system fell by Tk 503 crore in the first four months of the 2025-26 financial year, as the government relied more on non-bank and foreign financing sources to manage the budget deficit.
Bangladesh Bank data showed that between July and October, the government borrowed Tk 6,125 crore from the central bank, but repaid Tk 6,628 crore to commercial banks, resulting in negative net borrowing of Tk 503 crore.
After the fall, outstanding net borrowing from banking system stood at Tk 5.5 lakh crore as of October 30, 2025.
The government set Tk 1,04,000 crore net borrowing target from the banking system.
BB officials said that the government intentionally reduced borrowing from commercial banks because of higher interest rates on treasury bills and bonds, which increased the cost of domestic debt servicing.
Instead, it has turned to concessional external loans from development partners and bilateral lenders, which offer longer tenors and lower rates.
Central bank officials noted that the slowdown in government borrowing aligned with its monetary policy goals of curbing inflation and discouraging reliance on central bank money creation.
Inflation has remained below 9 per cent since June after remaining above that level for 27 consecutive months, offering some policy space to maintain tighter liquidity control.
Interest rates on government securities have also declined in recent months, with Treasury bill and bond yields falling from around 12 per cent in June to about 10 per cent in October.
Bankers said that liquidity in the banking system remained comfortable, but private credit growth continued to stagnate.
Growth in loans to the private sector dropped to 6.29 per cent in September, reflecting weak investor confidence and slow business activity.
The government borrowed Tk 9,626 crore from non-banking sources, such as non-bank financial institutions, insurance companies, individual investors, etc, through treasury instruments and Tk 9,062 crore from other domestic sources, excluding national savings portfolio during the July-October period.
A senior central bank official cautioned that borrowing could pick up later in the financial year as election-related expenses may rise and development projects accelerate.
The net government borrowing from the banking system dropped to Tk 72,372 crore in FY25 鈥� the lowest in four years 鈥� supported by higher foreign inflows and better fiscal management.
It indicated a deliberate effort to balance fiscal needs without reigniting inflationary pressures.
