Government domestic bank borrowing in the first six months of the 2025–26 fiscal year has risen markedly to BDT 53,386 crore, exceeding half of the annual target and signalling growing pressure on the public financing structure early in the fiscal cycle.
According to the latest data from the central bank, total domestic borrowing by the government between July and December stood at BDT 62,246 crore. The banking sector accounted for the overwhelming share of this increase, while non-bank financial institutions and savings instruments contributed comparatively modest amounts.
The figures reveal a significant shift in the composition of government borrowing. While bank borrowing has expanded sharply, funding from non-bank financial institutions has contracted, and net inflows from savings instruments have remained relatively subdued. Economists suggest this reflects broader changes in interest rate dynamics, liquidity conditions, and shifting investor preferences within the domestic financial system.
Government Domestic Borrowing Overview
| Category | Jul–Dec 2025–26 (BDT crore) | Jul–Dec 2024–25 (BDT crore) | Change |
|---|---|---|---|
| Bank borrowing | 53,386 | 6,740 | ~8-fold increase |
| Non-bank financial institutions | 8,861 | 24,688 | 15,827 decrease |
| Savings instruments (net) | 2,461 | Not significant | Modest increase |
| Total domestic borrowing | 62,246 | 31,428 | Nearly doubled |
Compared with the same period of the previous fiscal year, when bank borrowing stood at just BDT 6,740 crore, the current figure represents an almost eightfold increase. Analysts attribute this sharp rise primarily to higher government expenditure requirements alongside relatively sluggish revenue mobilisation.
In contrast, borrowing from non-bank financial channels has declined substantially, falling from BDT 24,688 crore a year earlier to BDT 8,861 crore in the current period. Market observers link this contraction to reduced attractiveness of savings certificates due to lower returns, alongside a gradual shift of household savings towards alternative investment avenues.
The government has set an overall domestic borrowing target of BDT 125,000 crore for the full fiscal year. Of this, BDT 104,000 crore is expected to be raised from the banking sector, while BDT 21,000 crore is projected from non-bank sources.
Economists note that despite the rapid growth in government bank borrowing, the immediate crowding-out effect on the private sector remains limited due to subdued investment demand. However, they caution that this balance could change if private sector credit demand accelerates, potentially leading to competition for available banking liquidity. Such a scenario could restrict credit flow to businesses and exert upward pressure on interest rates.
Overall, the increasing reliance on bank financing highlights a gradual shift in the government’s borrowing strategy. While it has so far remained manageable within current liquidity conditions, sustained dependence on the banking system could carry longer-term implications for financial market stability and private sector investment capacity.