Govt. breaks all bank borrowing records

The government is set to exceed its annual limit for bank borrowing within the first half of the current fiscal year. This is primarily due to poor forecast on revenue collection. The net result of this over-borrowing is sure to hit private-sector investments as banks are already facing liquidity crunch. As of November 21, banks are owed Tk 150,702 crore by the government, which is an increase of 39 percent from June of the previous fiscal year. The fact that there was poor planning on precisely what revenue could be collected through VAT and taxes is now plain to see.    

The National Board of Revenue (NBR) had set a target of Tk 62,295 crore to be collected between July and September of this year. In reality, Tk 47,388 crore was realised during the period—a shortfall of about 31 percent. Economists fear that as revenue falls and the import of industrial raw materials increases significantly, it will eat up our export earnings. The fact that the government appears to be fixated on financing multiple mega-sized infrastructure projects, while ignoring much-needed reforms that would enable NBR to generate the necessary revenue, is leading us into a situation where our financial planners have no recourse but to borrow from banks.

Leading bankers in the country tell us that they are looking at a bleak future since the bulk of industrial and business loans are given out in January of every fiscal. But given the rate at which the government is borrowing, it will certainly put a big dent on lending. Unless this trend is reversed, we may have trouble financing our debt in the future. Borrowing from banks should be the last resort and efforts need to be made to mobilise internal avenues for revenue generation—through taxation, VAT, removal of tax on profits of savings certificates to begin with.