Govt's borrowing falls on slow ADP spending

The government's net domestic borrowing in the first five months of the fiscal year was only 23.8 percent of the budget target owing to slow spending on annual development programme.

Between the months of July and November of last year, the government's net domestic borrowing was Tk 14,666 crore against the budgetary target of Tk 61,548 crore for fiscal 2016-17, according to data from the central bank.

At the beginning of a fiscal year, the government's spending, especially on development works, remains slow, said a finance ministry official.

Development spending from the government's own funds in the first five months of fiscal 2016-17 stood at about 21 percent of the total allocation, according to data from the Implementation Monitoring and Evaluation Division.

Non-development spending though is much lower, which was 15.37 percent of the total allocation in the first three months.

“The growth in revenue has been good, so the government has to borrow less from domestic source,” the finance ministry official said.

However, the government has not borrowed a single taka from the banking system; rather, it repaid Tk 6,702 crore, thanks to the huge sales of savings instruments during the July-November period.

In fiscal 2016-17, the government's target for borrowing from the banking system is Tk 38,938 crore.

On the other hand, net non-bank government borrowing through savings instruments during the five-month period was Tk 21,368 crore -- against the entire year's target of Tk 22,610 crore.

The rate of interest on savings instruments is now more than double than that on bank deposits, said a Bangladesh Bank official. As a result, savers are flocking to buy savings instruments.

At present, the rate of interest on savings instruments is around 12 percent, whereas the rate of interest on bank deposit is almost below 6 percent -- lower than the average inflation rate.

Savers now encash money after maturity of a deposit scheme to buy savings instruments, said an official of Sonali Bank.

In the first five months of the fiscal year, various savings instruments amounting to Tk 28,862 crore were sold, up almost 50 percent year-on-year.

“Subsequently, the government's high cost borrowing is soaring,” the BB official said.

In the first five months of the fiscal year, the government repaid Tk 5,850 crore as interest on savings instruments, which was Tk 4,352 crore a year earlier.