Staff Correspondent:

In the upcoming fiscal year’s budget, the government is set to significantly reduce its target for borrowing from banks. This decision aims to minimize the budget deficit and slightly shrink the overall budget size.

For the 2025–26 fiscal year, the bank loan target is planned to be reduced by approximately 25%, setting it at Tk 1.04 trillion. According to a finance ministry official, the budget deficit for the current fiscal year is also expected to drop to Tk 2.26 trillion.

Sources from the finance ministry revealed that to meet the deficit in the upcoming budget, the government intends to rely more on foreign loans instead of domestic sources, as the interest rates on foreign loans are comparatively lower.

The budget size is expected to be around Tk 7.90 trillion, which is Tk 70 billion less than the original budget for the current fiscal year. This marks the first time in recent years that the budget size is set to contract.

Economists believe that reducing bank loans along with budget deficit targets is a logical step. If the government borrows heavily from banks, it becomes challenging for the private sector to access credit.

Currently, the interest rates on treasury bills and bonds are quite high, making banks more inclined to lend to the government.

After a recent meeting of the Government Procurement Advisory Committee, Economic Adviser Salehuddin Ahmed told reporters, “We will not implement the budget by borrowing from banks or printing money. This budget will be realistic and implementable”.

He also mentioned that there would not be a large deficit in the budget, and the government would refrain from taking loans for mega projects. Over the past few years, the budget size increased due to bank loans, even though revenue collection did not see much growth.

As of January 2025, the government’s total domestic debt stood at Tk 9.42 trillion, which was Tk 7.22 trillion in June 2021.

For the 2025–26 fiscal year, the government plans to borrow a total of Tk 1.25 trillion from domestic sources. Of this amount, Tk 210 billion is expected to come from non-bank sources, such as savings certificates and the sale of treasury bonds to individuals and corporations.

In the original budget for the current fiscal year, the target for domestic borrowing was Tk 1.61 trillion, which has been reduced to Tk 1.17 trillion.

Among this, the amount borrowed from banks was initially set at Tk 1.38 trillion but has been revised down to Tk 990 billion.

However, during the first seven months of the current fiscal year, only Tk 155.31 billion was borrowed from banks, which is much lower than the revised target.

Key reason for this shortfall is the slow pace of ADP (Annual Development Programme) implementation. During this period, the government did not borrow from the Bangladesh Bank; instead, it repaid Tk 594.86 billion.