Facing a severe revenue shortfall and mounting debt payments, the government’s net bank borrowing plunged deeper into the red in FY2025-26, soaring by 77 per cent as commercial banks were called on to foot the bill.
Net borrowing from the banking system rose to Tk1,34,500 crore during the fiscal year from Tk76,125 crore a year earlier, according to Bangladesh Bank’s latest Fortnightly Major Economic Indicators, released on Sunday.
The amount exceeded the government’s FY2025-26 bank-borrowing target of Tk1,04,000 crore by about Tk30,571 crore.
Almost the entire borrowing came from scheduled banks.
The government borrowed a net Tk1,38,900 crore from commercial banks during the fiscal year, while its net liabilities to Bangladesh Bank declined by Tk4,372 crore.
This indicates that the additional financing came not from central bank money creation but from deposits and investable funds held by commercial banks.
At the same time, the government’s net borrowing from non-bank sources fell from Tk39,510 crore to negative Tk568 crore, meaning repayments exceeded fresh borrowing from those sources.
The shift significantly increased the government’s dependence on commercial banks for budget financing.
The decline in non-bank financing was also driven by weak demand for savings certificates. Net sales of national savings certificates turned negative at Tk6,063 crore in FY2025-26, indicating that investors redeemed more certificates than they purchased.
Weak revenue mobilisation added to the government’s financing pressure. During July-May, the National Board of Revenue collected Tk3,60,600 crore, equivalent to 81.58 per cent of its target, leaving a shortfall of about Tk81,443 crore.
Bangladesh Bank identified lower revenue growth, rising debt-servicing costs and higher expenditure caused by inflation as the main factors behind the sharp increase in government borrowing.
The rise came as private-sector credit growth slowed to 4.98 per cent at the end of May. In contrast, net credit to the government expanded by 24.61 per cent.
During the same period, bank deposits grew by 11.41 per cent, while broad money increased by 12.45 per cent.
Mixed economic picture
The central bank’s report presented a mixed picture of the economy.
Remittance inflows rose by 30.33 per cent to $35.59 billion, strengthening foreign exchange reserves, the current account and the overall balance of payments.
However, large-scale industrial production contracted by 1.42 per cent during July-April, compared with 6.97 per cent growth in the same period of the previous fiscal year.
Export growth also slowed sharply to 0.17 per cent from 8.60 per cent a year earlier.
The report said that despite improvements in banking liquidity, remittances and external-sector indicators, manufacturing, exports and private investment remained weak, suggesting that the recovery in productive economic activity had yet to gain momentum.
