Govt to borrow Tk 385 billion from banks to bridge deficit in new budget

The government has said in the budget proposed for FY 2015-16 that it aims to borrow Tk 385.23 billion from banks to cut the deficit.

The target for bank borrowings is 2.2 percent of the GDP, according to Finance Minister AMA Muhith.
 
On Thursday, Muhith presented in Parliament his budget proposal of Tk 3 trillion with a deficit of Tk 866.57 billion.
 
Businesses, however, raised eyebrows on the target as it saw a Tk 68.09 billion rise in borrowing from the current budget.
 
In an instant reaction, Dhaka Chamber of Commerce and Industry President Hossain Khaled told bdnews24.com, “We fear a decrease in private sector credit inflow.”
 
During his budget speech, Muhith said that the projected deficit amounted to 5 percent of the GDP.
 
The government will borrow Tk 565.23 billion from domestic sources, which is 3.3 percent of the GDP. 
 
Another Tk 301.34 billion, or 1.8 percent of the GDP, will be borrowed from external sources. 
 
Of the domestic borrowing, Tk 385.23 billion will be sourced from the banking sector and the rest will be sourced from savings instruments and non-bank sectors.
 
The ongoing 2014-15 budget had set a target to raise Tk 432.77 billion from domestic sources, which was later revised to Tk 547.14 billion.
 
Businesses allege that high bank borrowing by the government hinders private sector credit inflow and hikes the interest rate.