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Govt bank borrowing surges to ride out Covid-19 downturn

By Special Correspondent
07th-Jun-2020       
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The bank borrowing by the government rose sharply this fiscal amid economic downturn caused by coronavirus outbreak.
The borrowing during the July-May period of the current fiscal ( 2019-20) also surpassed the budget target by 35.74 per cent or Tk 16,932 crore, the central bank officials said.
In May alone, the government borrowed Tk 6,367 crore from banks to bridge the shortfall between the public expenditure and income from tax receipts.
Earlier, the government set Tk 47,363 crore borrowing target from banks for FY 2019-20 in order to finance the budget deficit that has been projected at 5.0 per cent of the GDP.
But it took Tk 64,2 94 crore from banks in between July 19 and May 20 of the current fiscal and the amount was 37.30 per cent higher than the last fiscal's bank borrowing, according to Bangladesh Bank (BB) officials.
"The government's net borrowing from the banking system exceeded the target in just six months (July-December) mainly for the dismal revenue collection, sharp fall in sales of national savings certificates," Dr Ahsan H Mansur, Executive Director of Policy Research Institute told The New Nation.
He said the borrowing peaked up later amid a major hit to the economy and public finances from the coronavirus pandemic, taking it to record high.
According to the National Board of Revenue (NBR), tax collection fell short of the target of Tk 45,000 crore in the first eight months of the current fiscal year.
Until February of this fiscal, the NBR earned Tk 1. 45 lakh crore of taxes against the target of Tk 1.90 lakh crore, the board data showed.
 "The government's bank borrowing is expected to increase further to cover the revenue shortfall, finance its stimulus package announced to support the coronavirus ravaged economy and releases any new stimulus,' said Dr Mansur.
The government has so far announced 19 stimulus packages worth Tk 1,02,957 crore to offset the Covid-19 shock on various sectors and minimise the sufferings of the people hit hard by the nationwide shutdown imposed to curb the spread of the deadly virus.     "With revenue collection being low than expected due to the contraction in economic output, the additional borrowing would push up the government's fiscal deficit for the current year," former finance adviser to the caretaker government Dr AB Mirza Azizul Islam told The New Nation.
Referring to the World Bank's recent forecast, he said, "Bangladesh's deficit might swell to 7.7 per cent of the GDP in the current fiscal, highest in the last one and a half decades."
It will explode to 9.8 per cent of the GDP in FY 2021, the Washington-based lender forecast.
Expenditure in the current fiscal year has been estimated for Tk5,23,190 crore, while the projected revenue is Tk3,81,978 crore. As a result, the overall budget deficit (excluding grants) is expected to be Tk1,45,000 crore, about 5 per cent of the GDP.
When asked, Mirza Aziz said, "It could take months before the economy returns to normal. The recovery would depend on the extent of coronavirus prevention and controls."

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