Govt’s bank borrowing to soar 77pc | Daily Star
12:00 AM, June 12, 2019 / LAST MODIFIED: 04:52 AM, June 12, 2019

Govt’s bank borrowing to soar 77pc

The government may bump up bank borrowing by as much as 77.32 percent to Tk 54,800 crore for financing the budget deficit in fiscal 2019-20 as it looks to reduce overdependence on saving instruments.

However, the government had a high bank borrowing target this fiscal year too -- of Tk 30,908 crore -- but that is unlikely to be met.

In the first 10 months of the current fiscal year, it did not borrow from the banking system; rather, it paid back banks. But from May 1 it started borrowing and as of May 21 the amount stood at Tk 11,609 crore.

The government may set a 37.20 percent lower target of Tk 30,000 crore for non-bank borrowing, which includes saving instruments.

In the first eight months of the fiscal year, Tk 35,602 crore was taken from non-bank sources. The sales of the saving instruments is high because of higher interest rates than banks’ deposit products.

The government will bring in some reforms in the sales of saving instruments in the next fiscal year so that its high-cost borrowing from it is reduced significantly, said a finance ministry official.

For instance, it is likely to raise tax at source on interest income from investment in savings instruments. The rate of withholding tax on interest earnings from savings instruments may go up from 5 percent to 7.5 percent or 10 percent, he said.

The average interest rates in case of government’s bank borrowing vary between 6 and 7 percent, while the interest rate in case of borrowing from saving instruments is 10-11 percent.

The next budget deficit will confine at 5 percent of GDP at Tk 145,380 crore, of which Tk 60,580 crore will come from foreign sources,  84,800 crore from domestic sources.

Stay updated on the go with The Daily Star Android & iOS News App. Click here to download it for your device.

Type START <space> BR and send SMS it to 22222

Type START <space> BR and send SMS it to 2222

Type START <space> BR and send SMS it to 2225

Leave your comments

Top News

Top News