THE government borrowing from the banking system has gone down in the wake of its increased reliance on the savings certificates and low rate implementation of Annual Development Programme ..." /> Logo
14th-Nov-2020

Cost overrun due to slow ADP implementation makes economy sluggish

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THE government borrowing from the banking system has gone down in the wake of its increased reliance on the savings certificates and low rate implementation of Annual Development Programme (ADP) due to pandemic induced lockdown. Excessive dependence on saving instruments will increase the interest expenditure of the government and make the banking sector volatile. We think the government's cautious ADP implementation is a right decision in a sense, but should focus more on basic healthcare, education, and employment generation. In the name of expenditure spree, embezzlement in mega projects, corruption and capital flights all should be handled properly to recover the economy from Covid-19 sluggishness.
From 1 July to 28 October this year, the amount of loan taken by the government from banks went up by Tk 163.58 crore while it increased by Tk 33,000 crore at the same time in the previous year. The government set the target to borrow Tk 84,980 crore from the banking system for the current financial year in order to meet the budget deficit. Despite the government reliance on bank loans, focus on savings certificates has increased significantly. Net savings certificates were sold for more than Tk 11,662 crore during the July-September quarter, 148% more than the last year's.  The budget for the Fiscal Year 2020-21 has set the target to borrow Tk 20,000 crore from the savings certificates. However, in the first three months of the current fiscal year, more than half of the target savings certificates have been sold. During the July-August period this year, the government paid more than Tk 10,000 crore as interest on savings tools.
The government bank borrowing slows due to lackluster ADP implementation in the first few months at the beginning of the year. The government is also cautious about other expenditures this year due to coronavirus. The government bank borrowing will soar in line with the pace of other project implementations which is likely to enhance at the end of the current financial year. The slow ADP implementation increases cost overrun, a balance is needed to recover the economy for two years after the pandemic ceased.