The government borrowing from the banking system would increase by 20% in the next fiscal year as compared to the current fiscal year to meet the widest deficit of the new budget.

The ceiling of bank borrowing has been set at Tk31,221 crore in the new budget which was set at Tk25,993 crore for the current fiscal year, according to a source in the finance ministry.

Though, the government increased the borrowing target to Tk29,982 crore in its revised budget due to fall in revenue collection.

Of the total amount of borrowing, Tk19,824 crore has been set for long term credit and Tk11,397 crore for short term credit, which was Tk16955 crore and Tk13,027 crore respectively in the revised budget of the current fiscal year.

The government needs to increase the amount of bank borrowing due to the demand for higher allocation by different ministries and divisions amid a slow revenue growth, a finance ministry official said yesterday.

The higher target of borrowing from the banking system is apprehended to affect the private sector and put pressure on inflation, said former adviser to a caretaker government Mirza Azizul Islam.

Entrepreneurs are now preparing to come up with large scale investment as private sector investment was nearly closed ahead of general election on January 5, said a senior executive of a private bank.

In these circumstances, higher ceiling of government borrowing might affect the liquidity position in the money market, he said.

The government borrowing in the current fiscal year did not affect the money market due to lower demand by private sector, he added.

The government wants to borrow Tk43,277 crore from domestic source in the new budget which is 27% higher from Tk33,964 crore that was set for the current fiscal year.

The borrowing target from foreign source has been set at Tk18,069 crore in the upcoming budget.

The target was set at Tk14,398 crore in the current fiscal year and cut down to Tk12,613 crore in the revised budget to be placed today.

News:Dhaka Tribune/05-Jun-2014