Economy
Tk 15k Crore Govt Loan from Banks
Prior this year, the government refunded more than what it had borrowed from the banks. as of sudden, the government has raised borrowing from the banking sector. In the previous month, the government has taken a loan of Tk 13 thousand 481 crores from the banking sector.
According to the sources of Bangladesh Bank (BB), in late September, the government’s net debt from banks increased by 12 thousand 526 crores to 2 lakh 82 thousand 712 crores. A month ago at the end of August, the amount of this loan was 2 lakh 69 thousand 230 crores. That is, in one month the government took a loan from the bank of 13 thousand 418 crores.
But the government’s debt is now towards the central bank. Increased demand for loans from central banks rather than borrowing from commercial banks. In the 3 months of the current financial year, the government has taken a loan of Tk 16,833 crore from the central bank. At the same time, the government’s debt to commercial banks decreased by Tk 4,307 crore. As a result, the government’s net debt has increased by Tk 12,526 crore.
Regarding the increase in debt, the former caretaker government’s financial advisor economist AB Mirza Azizul Islam told that the government’s expenditure has increased. As the income is less than the expenditure, now they are borrowing from the bank to meet the demand for additional money. However, the amount of bank loans taken by the government in 3 months is not more than their target. So there is no reason to worry about this loan.
After reviewing the data of Bangladesh Bank, it was found that in the first 2 months of the current (2022-23) financial year, the government did not take debts from the banking sector but instead paid them. In the two months till last August, the government’s net debt from banks decreased by Tk 955 crore to Tk 2 lakh 69 thousand 230 crores. Although at the end of June, the amount was 2 lakh 70 thousand 185 crores.
The government is setting a target that the bank will take a bank loan of Tk 1 lakh 6 thousand 334 crore to meet the budget deficit of the current fiscal year 2022-23. This amount is 29 thousand 882 crores more than the target for the current financial year. In the budget of the previous financial year, the target was to borrow 76 thousand 452 crores from the banking system. It has set a target of taking a loan of 35 thousand crore takas from savings accounts in the current financial year.
According to the data of the National Savings Directorate, savings bonds worth Tk 14,538 crore have been deposited or sold in the first 2 months (July-August) of the current fiscal year 2022-23. Out of this, principal and profit have been paid to the tune of 14 thousand 136 crores. After paying the principal and profit of savings bonds, the government’s net debt in this sector stands at Tk 401 crore.
In the meantime, regardless the fall in foreign exchange reserves, the central bank increased dollar sales. Bangladesh Bank is selling dollars to banks at Tk 97. Last Thursday sold 13 million dollars to several banks. In total, the sales volume of the current financial year so far has stood at 4 billion dollars. Against this, as much as 38 thousand crore takas have come out of the market. Last financial year 762 million 17 million dollars were sold. Thus, as a result of the sale of dollars, the foreign exchange reserves, which rose above 48 billion dollars, fell to 36 billion dollars.
It is known that due to various reasons including the instability of the food and energy markets due to the impact of the Russia-Ukraine war, the government aimed more at cost reduction in the beginning. Hence, the 1st month of the financial year also saw good growth in revenue and foreign grants and loans increased. Due to the effect of these two, the government has taken fewer loans from the bank. But now some projects have started. Again, due to the effect of the Russia-Ukraine war, food and fuel prices have increased in the world market. As a result, the government has to spend more money on food and fuel imports than before. However, the rate at which the cost of money has increased, the income does not increase at that rate and the bank has to take a loan. So the government is leaning on bank loans.
During the eleventh month of the current fiscal year, the country’s foreign currency reserves have fallen below $19 billion for the first time. After paying off some import bills, the reserves have now stood at $18.26 billion on Sunday.
According to the International Monetary Fund (IMF), as of May 8, the total foreign currency reserves of the country were $19.82 billion.
Mohammad Mezbauul Haque, the spokesperson of Bangladesh Bank, informed that through the Asian Clearing Union (ACU), the central bank has paid off import bills totaling $1.63 billion over the past two months.
However, Bangladesh Bank maintains that after paying off the import bills, the foreign currency reserves now stand at $23.71 billion.
According to the Central Bank’s accounts, the reserves were $25.27 billion on May 8.
The Dhaka Stock Exchange (DSE) and the DSE Brokers Association (DBA) have expressed gratitude towards Prime Minister Sheikh Hasina for her directive to list government companies in the capital market, a move hailed as timely and positive.
The directive was issued during the recent meeting of the Executive Committee of the National Economic Council (Ecnec) last Thursday.
Dr. Hafiz Muhammad Hasan Babu, Chairman of DSE, described the directive as a significant step towards enhancing the dynamics of the capital market. He emphasized that besides invigorating the capital market, this move would also attract foreign investment and promote sustainable development.
Despite previous efforts, government institutions had not been listed in the stock exchange, according to a notification issued by the DSE. The Prime Minister’s directive is seen as a pivotal step towards revitalizing and expanding the economy.
Dr. Babu further remarked, “The listing of reputable companies in the capital market, as directed by the Prime Minister, will greatly benefit the country’s economy. It will also enhance investor confidence.”
Similarly, the DBA released a notification applauding the Prime Minister’s directive, terming it as positive and timely for the capital market.
Saiful Islam, President of DBA, expressed optimism about the directive’s potential to accelerate the country’s capital market and overall economy. He pledged support to relevant government departments and regulatory bodies in implementing the directive, ensuring its positive impact on the economy, including the capital market.
India has expressed interest in financing Bangladesh’s Teesta project, announced Foreign Minister Hasan Mahmud. Speaking to reporters after a meeting with Indian Foreign Secretary Vinay Mohan Kwatra, Mahmud stressed the importance of aligning the project with Bangladesh’s needs. He confirmed discussions on the Teesta issue during the meeting. Mahmud also affirmed Prime Minister Sheikh Hasina’s upcoming visit to New Delhi, indicating that the finalization of the date would depend on the formation of the new Indian government following ongoing elections.
Meanwhile, the IMF has approved a $1.15 billion staff-level loan for Bangladesh in its third tranche. Mahmud noted the ongoing elections in India and the subsequent formation of the new government as factors influencing the scheduling of PM Hasina’s visit.
When asked about the sequence of visits to India and China, Mahmud suggested Delhi’s geographical proximity to Bangladesh. Diplomatic sources suggest PM Hasina’s visit to India is planned for early July, following India’s elections.
Pre-election surveys indicate strong prospects for Indian Prime Minister Narendra Modi’s re-election. Modi previously congratulated PM Hasina on her electoral victory in January, expressing optimism about strengthening ties between the two nations.
The last bilateral engagement between the prime ministers occurred during the G-20 Leaders Summit in September 2023. Modi is expected to invite South Asian and BIMSTEC leaders to his swearing-in ceremony, fostering regional cooperation.
Addressing border killings, Mahmud emphasized the government’s commitment to ending such incidents and promoting the use of non-lethal weapons by border forces. Discussions also covered enhancing physical and people-to-people connectivity, including cooperation with India to import hydropower from Nepal and Bhutan through India. Mahmud highlighted the need to further ease visa restrictions to strengthen people-to-people relations.
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