Bangladesh’s fiscal landscape has come under renewed scrutiny after government borrowing from the banking system surged sharply in recent months, raising concerns among economists and business leaders over debt sustainability, liquidity pressures, and long-term macroeconomic stability.
According to central bank data, government borrowing from banks has increased by nearly BDT 41,000 crore within just one and a half months under the current administration. In the last three months alone, total borrowing reached approximately BDT 56,000 crore, reflecting an accelerated reliance on domestic banking sources to finance operational expenditures.
Officials and analysts attribute the sharp rise primarily to a widening gap in revenue collection. With tax mobilisation significantly below target, the government has increasingly depended on short-term bank borrowing to meet recurrent expenditure, including salaries, subsidies, and energy-related costs. As a result, borrowing over the first nine months of the fiscal year has already exceeded the full-year target, indicating severe fiscal stress.
Overall, data suggests that government borrowing from the banking sector has risen by nearly BDT 175,000 crore over the past 14 months following the political transition after the fall of the previous administration. Economists warn that such rapid expansion of domestic debt could create structural risks for the financial system if not managed prudently.
Government Bank Borrowing Overview
| Period | Estimated Borrowing from Banks |
|---|---|
| Last 14 months | ~BDT 175,000 crore increase |
| Last 3 months | ~BDT 56,000 crore |
| Last 1.5 months | ~BDT 41,000 crore |
| First 9 months of FY | ~BDT 109,000 crore (exceeding target) |
The fiscal strain has been compounded by persistent economic stagnation, weak private investment, and subdued job creation. High inflation has further reduced consumer purchasing power, contributing to slower economic activity and weaker tax compliance. In the first eight months of the fiscal year alone, revenue shortfall is estimated at around BDT 71,000 crore.
At the same time, government expenditure has not slowed, creating a widening budget deficit. External pressures, including geopolitical instability in the Middle East affecting energy prices, have also added to fiscal demands, particularly in fuel and import subsidies.
The rapid increase in borrowing has sparked warnings from policy experts. Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD), cautioned that Bangladesh risks falling into a debt trap if revenue mobilisation is not urgently strengthened.
He noted that while the government is compelled to borrow to manage energy costs and other obligations, long-term stability depends on improving domestic resource mobilisation. “The key priority must be increasing revenue collection and reducing dependency on bank borrowing,” he observed, stressing the importance of fiscal discipline alongside electoral commitments.
Business leaders have also expressed concern over the impact on the financial sector. According to Bangladesh Knitwear Manufacturers and Exporters Association president Mohammad Hatem, excessive government borrowing from banks ultimately weakens the broader economy. He warned that repayment pressures could eventually create fiscal bottlenecks for the state.
Similarly, Dhaka Chamber of Commerce and Industry president Taskin Ahmed highlighted an ongoing liquidity crunch in the banking sector. He pointed out that regulatory tightening and rising non-performing loans have restricted banks’ ability to extend credit to private enterprises.
He further noted that capital shortfalls across numerous banks have reduced lending capacity, contributing to tighter credit conditions for businesses at a time when investment is already subdued.
Broader Economic Concerns
- Weak revenue growth despite rising expenditure
- Increasing reliance on short-term domestic borrowing
- Banking sector liquidity stress
- Rising inflation reducing consumer demand
- Sluggish private sector investment
Economists caution that if current trends continue, Bangladesh could face mounting pressure on its banking system, potentially crowding out private sector credit and slowing economic recovery.
While government borrowing remains a necessary tool for fiscal management, analysts stress that structural reforms in taxation, expenditure control, and financial sector governance will be essential to avoid long-term macroeconomic imbalance.