The government’s borrowing from the banking system crossed Tk 225 billion during the just-ended financial year, according to data available from the Bangladesh Bank (BB).

The amount that the government borrowed till June 28, 2012 is much higher than the original target of Tk 189 billion set for FY 12, but less than the new limit of Tk 291 billion as it was revised by 45 percent in last April.

Sources said, the government is likely to borrow more funds in the current week for meeting budget deficit.

As per the latest development, the government is, so far, burdened with Tk 945 billion loans that it borrowed from the banking sector in different tenures over the years.

A top official of a state-owned commercial bank said the unprecedented rise in government’s borrowing was mainly because of cash supports to some agencies like Bangladesh Petroleum Corporation, Bangladesh Chemical Industries Corporation and Bangladesh Agriculture Development Corporation.

The borrowed funds were utilised for financing the budget deficit and meeting the import costs of those state-owned agencies, he added.

The sources said the government borrowed from the central bank, four state-owned commercial banks, twelve primary dealers (PD) banks and three non-banking financial institutions.

“All of them are now reeling under acute liquidity crisis as they purchased a large number of securities (Treasury Bills and Bonds) from the government costing huge amounts,” said the official, seeking anonymity.

The government was severely criticised by various quarters throughout the year for borrowing such a huge fund.

Economists opposed government’s strategy of high borrowing from the banking system as it has crowded out banks’ lending capacity to the private sector. They said scarcity of funds will be crucial for growth of domestic production.

In April this year, the International Monetary Fund (IMF) suggested the government for lessening the borrowing from banks. It also urged the central bank not to create excess money, which is the principal component to fuel inflation.

The lending agency officials, during a recent visit to Dhaka, had also urged the government not to run the fiscal and monetary policies separately.

They held the inconsistency between the fiscal and monetary policies responsible for high borrowing from the banking system.

“Fiscal and monetary policies should be consistent with one another,” IMF official David Cowen told reporters at a press seminar in Dhaka in April last.

It also urged the government to accelerate the efforts made for unlocking the external aid commitments, which remains in a deadlock between the government and the donor agencies because of alleged corruption in Padma Bridge construction project.

The Daily Sun/Bangladesh/ 5th July 2012