After taking a cautionary stance from the beginning of this fiscal, the government is likely to go for borrowing big sums from the banking system in the later half of the current financial year to meet the fiscal expenditure amid lower revenue growth and scarce resources, sources in the finance ministry said. 

The target of borrowing from banks has been set at Tk 25,993 crore for 2013-14 fiscal. However, as of February 9, the government borrowed only Tk 3,729.50 crore from the banking system, according to Bangladesh Bank (BB) statistics. 

Two reasons for the low-scale borrowing are cited: the government maintained a cautious policy in bank borrowing during the first six months of the current FY compared to the previous year and there had been a slowdown in development activities that eventually led to ADP cuts. 

The government borrowed Tk 7782.15 crore during the same period in the last fiscal, and the borrowing increased abnormally at the end of June 2013.

Analysts largely attributed the less enthusiasm in bank borrowing to a lower development spending for prolonged political unrest over the parliament-election issue as well as trial of the war-crime accused. 

Though the impact of the revenue shortfall has been addressed partly by curtailing the size of the Annual Development Programme (ADP) in the revised budget, the government’s bank-borrowing target remains unchanged as the fiscal-expenditure plan is yet to be higher than the previous fiscals. 

As per the target of this fiscal, the government will pull out the remaining Tk 22,263.50 crore from the banks by June, sources in the finance ministry said.

“There was no change in revised budget. The plan remains the same,” said the source.

In the monetary policy statements (MPS) for the January-June period, Bangladesh Bank stated that it would comply with the demand of the government to help meet the budgetary spending.

The Tk 222,491-crore budget for the 2013-14 fiscal includes a Tk 73,968-crore ADP outlay and an estimated Tk 156,621 crore for non-development expenditures. 

The plan was to keep the budget deficit at 4.8 percent or Tk 55,032 crore in FY 14. 

To meet the deficit, the government planned to mobilise Tk 25993 crore from bank borrowings, Tk 7,971 crore from sales of savings certificates and other non-banking sources and the remaining Tk 21,068 crore from external sources such as foreign aid and grants.

Analysts said the government will find it difficult to make up for this huge budget deficit because of a shortfall in revenue income coupled with lower sales of government securities and foreign aid inflow. 

The revenue target for the current fiscal was fixed at Tk 167,459 crore. Of the total income, Tk 136,090 crore was expected from tax revenue collected by the National Board of Revenue (NBR), Tk 26,240 crore from non-tax revenue and Tk 5,129 crore from non-NBR sources. 

NBR’s tax-revenue collection during the July-December period of FY 14 stood only at Tk 50,338.29 crore, portraying a gloomy figure in the revenue-growth chart. 

During the July-November period of the current fiscal, net receipts of foreign aid stood at $441.68 million after repayment (principal) of $525.67 million.

In 2012-13 FY, the government set the target of bank borrowing at Tk 22,300 crore. 

The government’s bank-borrowing target was surpassed by Tk 2600 crore to Tk 22,500 crore in 2011-12 fiscal due to emergency fund requirement for petroleum import in order to run the rental and quick-rental power plants. 

Hefty bank borrowings drew widespread criticism from various quarters in the past few years as it thwarts private-sector investment and fuels inflation as well as creating liquidity crisis in the banking sector.