The government’s borrowing from the banking sector declined by 67.64 per cent in the just concluded financial year 2013-14 compared with that of a rise by 14.50 per cent in the FY13 due to a slower pace in implementation of the government’s development works. BB officials told New Age on Tuesday that the government had to borrow less from the banking sector as it (the government) was compelled to cut its implementation target of annual development programmes in the FY14 amid political unrest.
Besides, the government was also able to borrow more than Tk 10,000 crore by selling its savings instruments in the first 11 months of the FY14.
According to the latest BB data, the government’s borrowing from the banking source stood at Tk 7,950.92 crore in the FY14 against Tk 24,570.98 crore in the FY13. The government borrowing from the banking source was Tk 21,459.03 crore in the FY12.
Lower government borrowing usually put a positive impact on the macroeconomic situation as the private sector gets more credit from the banks making the business environment vibrant, a BB official said.
But, the recent trend in government borrowing did not bring any positive impact on the private sector as the businesspeople have recently adopted a ‘wait and see’ approach to expand their business by taking loan amid political uncertainty, he said.
The government’s borrowing from the scheduled banks stood at Tk 24,010.97 crore in the FY14 against Tk 30,027.99 crore in the FY14.
The overall government borrowing from the banking source, however, stood at Tk 7,950.92 crore in the last financial year as the government repaid Tk 16,060.05 crore to the central bank in the period.
In the 2013-14 fiscal budget, the government aimed to borrow Tk 25,993 crore from banking source, but that was later raised to Tk 29,982 crore in the revised budget.
The BB data showed the government had taken loan of Tk 11,312 crore by issuing treasury bills and Tk 16,788.41 crore by the treasury bonds and other government securities from the scheduled banks.
The government’s development expenditure in the first 11 months of the FY14 experienced a record low at 67 per cent, the lowest in last five years, despite an expenditure spree in May, according to the planning ministry.
In July-May, the 54 government ministries and divisions spent Tk 39,982 crore or 67 per cent against the total ADP allocation of Tk 60,000 crore.
The government in April downscaled the ADP size to Tk 60,000 crore from Tk 65,870 crore considering the poor implementation rate and shortfall in revenue collection.
Against the backdrop, the government borrowing from the banking sector declined significantly, the BB official said.
The clients have recently made huge amount of investment in national savings certificates and bonds due to lower rate of interest in the banks’ deposit products which also kept the government’s borrowing from the banking sector low, he said.
According to the Directorate of National Savings data, the net investment in the savings instruments was Tk 10,018.25 crore in July-May of the FY14 while it was Tk 735.19 crore in the same period of the FY13.
In the 2013-14 fiscal budget, the government aimed to borrow Tk 4,971 crore from the savings instruments, but the figure surpassed to Tk 11,000 crore in the FY14.
Another BB official said that the central bank had earlier requested the government to lower its (government) bank borrowing to give space to the private sector for banks’ credit.
But, the private sector credit growth stood at only 11.39 per cent in May 2014 on year-on-year although the BB set the credit growth target at 16.50 per cent at the end of June this year.
A majority number of the businesspeople are now reluctant to take loan from the banks due sluggish business amid political uncertainty, he said.
For this reason, the lower government borrowing from the banking source did not put any positive impact on the private sector, the official said.
-With New Age input
