The government’s net bank borrowing in the first half of the current fiscal year accounted for 2.38 per cent of its budgetary target for the fiscal year 2020-2021 amid poor implementation of the annual development programme and surge in sales of national savings certificates.

The government’s net borrowing from the banking system was just Tk 2,022.39 crore till December 29, 2020 against its borrowing of Tk 48,016 crore from banks in the first half of the fiscal year 2019-2020.

In first half of FY21, the government’s borrowing dropped by 95.79 per cent or Tk 45,994 crore compared with that in the same period of the previous fiscal year.

Although the government’s borrowing from the banking system reached an all-time high in FY20, the volume dropped drastically in FY21 despite the fact that the government’s revenue collection situation had remained dismal.

Former interim government adviser AB Mirza Azizul Islam attributed the plunge in the government’s bank borrowing to the surge in the NSCs sales and lower spending in the annual development programme.

He also mentioned that the government had refrained from issuing fresh incentives and its demand for funds had remained low.

In July-November of FY21, implementation of the annual development programme dropped to 17.93 per cent, the lowest in the last five years.

As per the Bangladesh Bank data, the government paid back Tk 28,641 crore to the central bank and borrowed Tk 30,663 crore from scheduled banks during the first half of FY21.

The government’s outstanding borrowing from the central bank dropped to Tk 15,712 crore on December 29, 2020 from Tk 44,354 crore on June 30, 2020.

On the other hand, it’s outstanding borrowing from the scheduled banks increased to Tk 1,64,133 crore on December 29, 2020 from Tk 1,33,470 crore on June 30, 2020.

In July-November of FY21, net NSCs sales reached Tk 19,044.92 crore against the Tk 20,000-crore projection fixed in the fiscal budget for the year 2020-2021.

In the budget for FY21, the revenue collection target was set at Tk 3,78,000 crore, leaving a deficit of Tk 1,90,000 crore.

To finance the deficit, the government has planned to collect Tk 1,09,983 crore from domestic sources, including Tk 84,980 crore from the banking system.

Bankers said that a sharp decline in deposit rates in the banks prompted savers to divert their investments to the NSCs from the banks.

Besides a rise in the NSC sales, the government also received funds from different autonomous, semiautonomous and state-owed entities that helped it to meet the deficit financing without depending solely on the banking sources, the bankers said.

In addition to that, payments to the central bank by the government against its debts would lower the money circulation on the market, helping to contain the inflationary impact of the high liquidity in the banks.