The government's borrowing from the banking sector is increasing fast although it has received Tk 3,184 crore in licence renewal and spectrum fees from mobile operators this month.

The government did not get as much as it expected as earnings from savings instruments, mobile operators and aid from donors.

The mismatch has led the government to higher borrowing from the banking sector, said officials.

The cost of subsidy has also gone beyond the government estimate, putting pressure on its expenditure.
In four months and 22 days (July 1 to Nov 22), the government borrowed Tk 20,204 crore from the banking system, which is 638 percent higher than in the same period a year ago.

The amount is Tk 1,248 crore more than the borrowing target for the current fiscal year.
Bangladesh Bank had been expecting that the amount would cut the government's borrowing from the banking channel.
Most significantly, the government's development expenditure did not get momentum and only 15 percent of the annual target was spent in the first four months of the current fiscal year.

But the amount of bank borrowing has already crossed the target set for the entire fiscal year.

Borrowing from the central bank has been on the rise, and in four months and 22 days Tk 12,222 crore or 61 percent of the total amount borrowed was taken from the BB, creating pressure on inflation.

A finance ministry official said non-development expenditure, especially the government's spending on subsidy, went up, but foreign aid and non-bank borrowing marked a drastic fall.

Another finance ministry official said the government has also been giving loans to autonomous and semi-autonomous bodies, increasing its borrowing limit.

During the four-month-22-day period, the government gave Tk 588 crore as loans to the autonomous and semi-autonomous bodies.

The government had a borrowing target of Tk 6,000 crore through savings instruments in the current fiscal year.

But available statistics for the first three months of the current fiscal year shows that the government's borrowing through savings instruments fell by 72 percent.

During the July-September period the government borrowed Tk 498 crore through savings instruments. The amount was Tk 1,767 crore during the same period last year.

People are now less interested in savings instruments as they get higher interest on their deposits in banks.
Also, the government had a meager amount of foreign aid at $330 million so far in the current fiscal year. In the July-October period foreign aid fell by about 26 percent compared to the same period last year.

On the other hand, the government had to pay about $321 million on principle and interest amount which meant Bangladesh had only $9 million net foreign aid which is equivalent to Tk 64 crore.

In the current fiscal year's budget it was projected that the government would receive Tk 13,058 crore in foreign aid.

The finance ministry official said the mismatch between the government's earning and expenditure led to a huge borrowing from banks.

Source: The Daily Star/ Bangladesh/ 27th Nov 2011