The beginning of the new fiscal year marked a determined government effort to rein in rising inflation as the upcoming election looms.
The strategy entails a deliberate reduction in reliance on central bank borrowing to cover budget deficits.
In the first month of the fiscal year, July, data furnished by the Bangladesh Bank highlighted not only the government’s abstention from central bank borrowing but also its repayment of Tk 9,354 crore.
During July, the inflation rate stood at 9.69%, marking a marginal 10 basis point decline from the preceding month.
This decrease was attributed to a drop in non-food inflation triggered by an influx of new capital into the economy.
Addressing the fiscal deficit of Tk 261,785 crore for the current year, the government pivoted towards borrowing from commercial banks, aiming to draw Tk 132,395 crore from the banking system.
However, this shift could potentially constrain funds accessible to the public and private sectors, which might, in turn, help mitigate inflation.
According to data released by the Bangladesh Bank, borrowing from banks in the prior month amounted to Tk 5,531 crore, reflecting a reduction of Tk 3,823.3 crore in net borrowing from the banking system in July compared to the previous month.
While a finance ministry official exercised caution about executing this strategy, Ahsan H Mansur, Executive Director of the Policy Research Institute, endorsed the move while expressing reservations about its adherence.
Throughout this fiscal year, the government’s primary goal is maintaining inflation at or below 6%. Concurrently, the finance ministry has unveiled ongoing efforts to curtail expenses and reduce funding requisites.
In contrast to the period leading up to the 2018 elections, which saw numerous project approvals, recent times have seen a decline in meetings of the Executive Committee of the National Economic Council.
