TDS Desk:

Government borrowing from banks has slowed in the first weeks of the current fiscal year thanks to sluggish development spending curbing the appetite for funds.

From July to August 18 of the current fiscal year, the government took out Tk 4,703 crore from the banking system, a 77 percent drop compared with the same period a year earlier, according to the latest Bangladesh Bank data.

In the corresponding period last year, borrowing stood at Tk 20,180 crore.

In the first seven weeks of the current fiscal year, the government took Tk 6,495 crore from the Bangladesh Bank, mainly through ways and means advances. This allows the government to secure short-term loans from the central bank to manage temporary cash flow mismatches between its receipts and payments.

During the period, the government repaid Tk 1,792 crore to scheduled banks.

The national budget for the current fiscal year set a target of Tk 104,000 crore for government borrowing from the banking sector.

According to central bank data, government bank borrowing amounted to Tk 72,372 crore in the fiscal year 2024-25, down from Tk 94,282 crore in FY 2023-24.

“Development project implementations are progressing very slowly, mainly because the interim government is being extremely cautious, thoroughly reviewing projects to assess their necessity and appropriate cost,” said M Masrur Reaz, chairman of the Policy Exchange of Bangladesh.

The economist said even existing projects are advancing sluggishly amid an overall slowdown in the civil service. “The government is preoccupied with other issues and is not prioritising project implementation at the moment.”

Development expenditure fell to a historic low last fiscal year, with only 68 percent of the revised Annual Development Programme (ADP) executed.

This was the weakest performance since the fiscal year 1976-77.

Government data show that ministries and divisions managed to spend Tk 153,452 crore out of a revised Tk 226,165 crore allocation.

In the first month of the current fiscal year, ADP implementation fell to a seven-year low, with just Tk 1,644 crore disbursed. This is only 0.69 percent of the Tk 2.39 lakh crore allocated for the year.

Out of 57 ministries and divisions, 12 did not spend a single taka from their allocation in the first month of the fiscal year, show official data.

This is the lowest start since the fiscal year 2018-19, when July expenditure was 0.57 percent of the ADP.

Meanwhile, the government has taken Tk 7,179 crore from non-bank sources such as financial institutions, insurers and individual investors in the current fiscal year until August 18.

This brings total domestic borrowing to Tk 11,882 crore, excluding the net position in national saving certificates.

The government mainly borrows from the banking sector through treasury bills and bonds.