The government’s borrowing from the banking system declined slightly, according to the central bank statistics.
Bangladesh Bank (BB) data show government’s borrowing came down to Tk. 15,664.25 crore, as of January 22, from Tk. 18,000 crore on January 4. The budgetary target of borrowing from banking system in the current financial year (FY) was Tk 18,957.

BB sources said that the latest reduction in government borrowing was a result of adjustment of tax revenues.
However, such borrowing crossed the entire year’s target in just four and a half months because of large spending on subsidy for the power and energy sector and social safety coverage and a fall in foreign aid mobilisation..

From July 1 to November 22, the government had borrowed Tk 20,204 crore from the banking system, which is 638 percent higher than in the same period a year ago. The amount was Tk 1,248 crore more than the borrowing target for the current fiscal year.

Of the total Tk 20,204 crore borrowed, the loan from the central bank alone was Tk 11,167 crore.
Then, revenues worth Tk 3,184 crore in licence renewal and spectrum fees from mobile operators helped the government to reduce the borrowing from the banking sector.

Meanwhile, with this year’s borrowing, the government’s net borrowing from the banking sector reached Tk. 86,800.95 crore.

Economists feared such high borrowing had contributed to escalate the inflation and often suggested the government avoid borrowing from banks.

A recent fiscal coordination committee meeting, chaired by finance minister AMA Muhith also discussed the borrowing and subsidy issues. Sources in the finance ministry said the meeting observed that total domestic credit, including government borrowing from banks, should be reduced to control inflationary pressure.

The source said the borrowing might double if the government did not cut spending and as a result, the revised target might rose to over Tk 25,000 crore.   

According to the BB source, the government’s income remains stagnant because of having inadequate response with regard to earnings from savings instruments, mobile operators and aid from donors.

Meanwhile, net foreign aid mobilisation has fall drastically. The projection of the government was to receive Tk 13,058 crore in foreign aid.

Sources say the earning from the tax revenue is the last resource for spending that couldn’t comply with the demand for money that drives the government to borrow from banking sector.

According to the finance ministry, the budgetary allocation for subsidy was Tk 20,477 crore, but the ministries demanded Tk 46,000 crore even after price adjustments.

The ministry projected that the probable requirement for subsidy may stand at Tk 35,000 crore after cutting down the subsidy demand. For the agriculture sector, the additional demand is Tk 11,600 crore which may be cut down to Tk 8,000 crore.

The demand of the Power Development Board (PDB) is Tk 10,000 crore but it may be kept limited to Tk 7,000 crore.
Bangladesh Petroleum Corporation (BPC) has asked for Tk 16,700 crore even after price adjustment, but the finance division projection is not to cross Tk 12,000 crore for the BPC.

The Daily Independent/Bangladesh/ 25th Jan 2012