'local businesses and trade might face hurdles in getting commercial bank loans over the next four months because of extra government borrowing of around Tk15,000 crore' 

Concerns have been raised within the finance ministry that government bank borrowing might exceed Tk40,000 crore in the current fiscal year because of a shortfall of revenue earning and an increase in the revised ADP.

The country fought all odds and prolonged political unrest to maintain a sound macro and fiscal economic situation during the last couple of years, but the strong position of the country might be lost, said a senior official of the finance ministry.

Seeking anonymity, the official also said local businesses and trade might face hurdles in getting commercial bank loans over the next four months because of extra government borrowing of around Tk15,000 crore.

The release of three tranches of Extended Credit Facility (ECF) of International Monetary Fund might also be halted unless the government complied with a condition of bank borrowing limit for the next nine months, sources said.

As per the IMF condition of ECF bank borrowing limit,  the government will be able to borrow Tk24,000 crore until June 30, 2014, while an additional Tk10,000 crore may be borrowed from the banking system until December.

Sources said finance ministry officials tried to convince a visiting ECF review mission last week that the government would reduce the bank  borrowing target to Tk24,000 crore from the Tk25,993 crore target set under the budget. 

On Thursday, a meeting of the National Economic Council (NEC) set the revised Annual Development Programme (ADP) amount at Tk60,000 crore from the original ADP of Tk65,870 crore. Earlier, the finance minister and planning minister took confronting stances after the Finance Division directed the Planning Commission that the revised ADP outlay should not exceed Tk55,000 crore.

Officials present at the meeting quoted Finance Minister AMA Muhith as saying that revenue collection would see a deficit of Tk11,000 crore this year, while the ADP implementation was also slow.

Muhith also criticised the ministries that demanded additional fund without considering the reality. The ministries were less interested in spending foreign funds and keener on spending from government funds, he claimed.

The revised ADP should be Tk55,000 crore, Muhith said, adding that if more allocation was made, the extra amount would have to be borrowed from the banking system.

A finance ministry official said the revised budget had fixed revenue target at Tk125,000 crore, which was unlikely to be met and the shortfall would be Tk10,000 crore to Tk11,000 crore . The overall credit-deposit ratio in the banking sector decreased to 70.8% in December 2013 from 71.91% in November 2013. The credit-deposit ratio was 76.59% in December 2012 and 80.33% in June 2012.

If the slow revenue growth and the rising expenditure continued through to the second half, bank borrowing might cross the budgetary target of Tk25,993 crore, an National Board of Revenue official said.

Between July 1 last year and January 6 this year, bank borrowing stood at Tk5,931 crore, compared to Tk7,213 crore from the same period a year ago, according to central bank statistics.

In the first six months of the 2013-14 fiscal, the government received Tk3,857 crore from net sale of national savings certificate, which was only Tk177 crore in the same period of fiscal 2012-13

Former adviser to caretaker government AB Mirza Azizul Islam said the increase of revised ADP was a political decision, adding that the private sector credit crowding out would definitely hamper the country’s growth target and the investment situation.

The issue should therefore be properly examined before going for borrowing from the banking system, he added.

Abdus Salam Murshedy, director of Premier Bank Limited, told the Dhaka Tribune that the idle money of banking sector should be used properly so that it was not difficult to supply funds through bank borrowing.

However, the government policy measures and the existing investment situation in the country were still not in favour of the investors, he also said.