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Bank borrowing falls far below target

Rejaul Karim Byron
The government's borrowing from the banking system stood at only 21 percent of its target in the first 11 months of the outgoing fiscal year due to slow implementation of development programmes.
Between July 1 last year and June 9 this year, around Tk 6,359 crore was borrowed from banks against the revised target of Tk 29,982 crore. The amount borrowed during the period fell 57 percent year-on-year.
Initially the government had a borrowing target of Tk 25,993 crore, which was raised by 15 percent in the revised budget.
During the period, ministries spent only Tk 39,982 crore under the govern-m e n t' s annual development programme, the amount being 67 percent of the revised allocation, according to Implementation Monitoring and Evaluation Division.
The implementation was 69 percent in the same period a year ago.
The pace of the development works
usually goes up after September, but most payments are made in June, which pushes up expenditure, along with bank borrowing, in the last month of a fiscal year, an official of the planning ministry said.
The ADP's revised allocation was Tk 60,000 crore in the outgoing fiscal year.
Though only Tk 3,934 crore was spent each month on an average during July-May, Tk 20,000 crore has to be spent in the month of June to meet the revised target, which officials said is not doable.
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As a result, the government may not need to borrow the entire amount of its target.
Also, borrowing through savings instruments has reduced the government's dependence on the banking system, a finance ministry official said.
The government's net borrowing through savings instruments was Tk 8,734 crore in the first 10 months of the outgoing fiscal year, according to central bank statistics.
Borrowing through savings instruments has already exceeded the target at Tk 8,000 crore and is likely to go up further. Though it will reduce the amount of bank borrowing, the interest cost will mark a rise.
However, the central bank made a signifi-
cant policy shift in bank borrowing this fiscal year, which has played an effective role in containing inflation.
The government borrowed Tk 21,201 crore from commercial banks during July 1 last year till June 9 this year.
However, it repaid Tk 14,841 crore to the central bank. As a result, the net borrowing wasTk 6,359 crore.
The commercial banks' excess liquidity is huge now and stood atTk 138,020 crore at the end of March.
This is why the government's borrowing was more from the commercial banks. If the borrowing from the central bank is reduced, non-food inflation goes down, officials said.