Govt on bank borrowing spree: Tk-1.24b borrowed daily in first 120 days of FY 2011-12
The government borrowed an unprecedented amount of Tk 1.24 billion a day from the banking channel on average during the first 120 days of the current fiscal year due mainly to the diminishing foreign aid inflow.According to Bangladesh Bank record, the government borrowed Tk 149.05 billion in July to October of FY2011-12.
Although the amount of government's average daily bank borrowing was around Tk 1.00 billion in the first quarter of the current fiscal year, it jumped by more than 60 per cent as around Tk 50 billion was borrowed in October alone.
In the process, the government has already availed of more than two-thirds of its projected annual bank borrowing of Tk 189.57 billion. Moreover, almost half of the borrowed amount in the first four months of FY2012, or Tk 78.87 billion, was taken from the central bank and the rest from commercial banks.BB officials attributed the unprecedented amount of borrowing to a hike in the government's public spending amid a declining trend in foreign loan inflow.
The country in the first quarter of FY2012 received only $246.2 million from multilateral and bilateral lenders but had to pay them $171.8 million back in debt servicing.Experts said the poor situation of foreign loan inflow might not improve in the coming months as the disbursement of funds for the Padma Multipurpose Bridge project was now facing a suspension.Besides, the annual meeting of the Bangladesh Development Forum has been deferred, indicating uncomfortable relations between the lenders and the government, they pointed out.
Bangladesh Institute of Development Studies executive director MK Mujeri told New Age that excessive bank borrowing by the government spelt further price hike of essential commodities.The monthly inflation rate on consumer price index rose close to 12 per cent in September, the second highest in South Asia, just behind Pakistan. Any further price hike only means yet more sufferings for the people of low and fixed income groups.
Referring to the BB providing half of the government's bank borrowing in the July-October period, MK Mujeri, a former central bank chief economist, termed it bad as the central bank simply printed the money and handed it to the government.He said, 'It will cause fiscal indiscipline and devalue the local currency against major currencies like US dollar and euro.'Besides, it will affect the credit growth to the private sector, the main driving force of the economy, he added.
Economist Debapriya Bhattacharya of the Centre for Policy Dialogue suggested that the government should intensify its effort to get budgetary support from multilateral lenders to overcome the current situation.The government, in the current national budget, projected to receive $600 million from the World Bank and $300 million from the International Monetary Fund as budgetary and balance of payment support. But, the progress made so far towards striking loan agreements with the multilateral lending agencies is insignificant.Debapriya said, without the budgetary and BoP assistance, it would be pretty hard for the government to keep its bank borrowing within the annual projection.
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