The government’s dependence on commercial banks for financing has grown sharply in recent months as revenue growth falters and private sector credit demand remains subdued.
By mid-April of fiscal year 2024–25, borrowing from commercial banks had climbed to Tk 985.79 billion, a nearly 60 percent rise from Tk 61,616 crore during the same period a year ago, according to data from Bangladesh Bank. However, net borrowing—calculated after repayments to the central bank—stood at Tk 422.48 billion, slightly below the Tk 46,355 crore recorded in the previous fiscal period.
This shift in financing comes after the central bank suspended direct lending to the government through money printing, a practice heavily criticised by economists for fuelling inflation. From July to April 16, the government repaid Tk 563.31 billion to the central bank, effectively ending its reliance on central bank credit and pivoting toward commercial banks.
A senior official from the central bank, speaking on anonymity, said the government had little choice. “With tax revenue falling short of expectations, the government appears increasingly dependent on the banking sector to cover its budget deficit,” the official stated.
Data from the National Board of Revenue reveals a modest 2.76 percent rise in collections during the first nine months of FY25. As of March, the NBR, responsible for 86 percent of total state revenue, had collected Tk 2564.86 billion—significantly below its revised target of Tk 4635 billion.
At the same time, private sector credit growth has dropped to its lowest level in decades. In February, credit expansion stood at 6.82 percent, down from 7.15 percent in January. Banks cited high interest rates and political uncertainty as dampening investment appetite.
This weak demand has left banks with excess liquidity, which they have redirected into government securities. “Banks now are heavily invested in the government treasury bills and bonds as credit demand in the private sector comes down,” said Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank.
According to Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, the government’s borrowing requirements are expected to grow in the coming quarter. However, he noted that current borrowing levels are manageable. “The rate is still not alarming,” he said.
The revised budget for FY25 has set a net bank borrowing target of Tk 990 billion. As of mid-April, approximately 43 percent of that amount has been tapped.
Beyond the banking system, the government also raised Tk 355.45 billion from non-bank sources, such as insurance firms, non-bank financial institutions, and individual investors, through treasury bills and bonds.
In total, from July 2024 to April 16, 2025, domestic borrowing excluding national savings certificates stood at Tk 777.93 billion, reflecting a broader shift in fiscal strategy amid constrained revenue flows and a subdued investment climate.
