Government borrows from banks heavily as pandemic hits revenue

The government is borrowing heavily from the banking sector as the coronavirus pandemic has hit revenue collection, while expenses have gone up, a researcher has said.

It borrowed Tk 109.58 billion from the commercial banks in the first 43 days of the new fiscal year to Aug 12. It has also repaid the Bangladesh Bank Tk 25.36 billion.

The government has set a target to borrow a total of Tk 849.8 billion from the sector in fiscal 2020-21.

Researcher Ahsan H Mansur says the aggressive borrowing will affect private-sector lending and thus investment.

The government had to go to the banks to pay salaries and allowances to officials and workers, and expenses related to tackling the pandemic because revenue collection has dropped sharply, Mansur told bdnews24.com.

The National Board of Revenue raised Tk 123.34 billion in the first month of the new fiscal year with a 22.7 percent year-on-year drop, missing the target by 36.35 percent.

Mansur, executive director of Policy Research Institute, said it is not a surprise when the government borrows heavily from banks due to low revenue collection. 

He said a good flow of foreign loans saved the government from borrowing excessively in the fourth quarter (May-July) of the last fiscal year.

“It had appeared once that the government’s bank borrowing would exceed Tk 1 trillion. Finally it was around Tk 610 billion,” Mansur noted. 

“Let’s see where the borrowing stands at the end of this fiscal year,” said Mansur, who is also the chairman of BRAC Bank.

In the revised budget that came after the coronavirus crisis started, the government raised the bank borrowing target to Tk 824.21 billion from the original target of Tk 473.64 billion in the last fiscal year.