Bank borrowing to spiral

Bank borrowing during the outgoing fiscal year is likely to shoot up by as much as 24 percent, due to falling collections from saving instruments and rising subsidy costs.
To meet the budget deficit for fiscal 2012-13, the government set the bank borrowing target at Tk 23,000 crore. The actual amount is tipped to stand at Tk 28,500 crore by year-end.
The trend is likely continue into fiscal 2013-14, with the bank borrowing target likely to be Tk 25,990 crore in the budget to be rolled out on Thursday.
Although the government's bank borrowing of Tk 8,377 crore during the first half of current fiscal year is only 36 percent of the initial target, it picked up drastically in the latter half of the year.
“It would comfortably cross the target by the end of the year,” said a finance ministry official preferring not to be named.
Economists tend to oppose bank borrowing on grounds that it increases the governments' fiscal costs, crowds out private sector investment and fuels inflation.
But subdued non-bank borrowing figures and burgeoning subsidy expenditure meant that the government had to resort to it.
Initially, the total non-bank borrowing target for the fiscal year was Tk 10,484 crore, with Tk 7,400 crore to be acquired through saving instruments. Till March 30, the government has managed only Tk 692 crore through that channel.
In view of that, the government has revised down its non-bank borrowing target to Tk 4,000 crore.
Subsidy to the energy sector was originally billed at Tk 13,300 crore, but sources said the figure may increase by Tk 2,000 crore.
Agricultural subsidy, too, has shot through the roof: the actual amount is said to double from the government's allocation of Tk 6,000 crore.
Increased bank borrowings mean higher fiscal costs for the government. Four years ago, the government paid around Tk 15,000 crore on interest payment, but the finance ministry's projection says the figure is likely to double in the upcoming fiscal year.