A file photo shows clients queuing up in front of a private bank in Dhaka. The government borrowing from the commercial banks soared in the first six months of the current fiscal year. — New Age photo

The government borrowing from the commercial banks soared in the first half of the current fiscal year, although the overall borrowing decreased compared with that of the same period of the last fiscal year on a decreased borrowing from the Bangladesh Bank.
BB officials and economists said that the high government borrowing from the scheduled banks would put extra pressure on the private sector in the coming months.
BB data showed that the government borrowing had stood at Tk 7,926.29 crore in July-December of the FY 2012-13, down 49.28 per cent from Tk 15,630.28 crore in the same period of the FY 2011-12.
The BB data, however, showed that the government borrowing from the scheduled banks in the first half of the FY 2012-13 increased to Tk 10,629.94 crore, up by 43.76 per cent from Tk 7,394.14 crore in the same period of the FY 2011-12.
The government repaid the central bank Tk 2,703.65 crore by the end of the first half of the FY 2012-13, pushing down its overall bank borrowing to Tk 7,926.29 crore.
Former Bangladesh Bank governor Salehuddin Ahmed told New Age on Monday that the credit growth in the private sector had already declined due to the increased government borrowing from the scheduled banks.
The falling private sector credit growth has hampered the domestic investment sector, resulting in a sluggish situation in the employment generation, he said.
The government should avoid borrowing only from the scheduled banks as such trend will create a negative situation for the private sector.
He said, ‘The government will try to improve the implementation situation of its annual development programme as this is the final year of the government.’
Under the circumstances, the government borrowing may increase in the second half of the FY 2012-13, he said.
Due to an increased government borrowing and contractionary monetary policy taken by the BB, the credit growth in the private sector decreased to 18.38 per cent in October 2012 from that of 19.88 per cent in the previous month, showed the BB data.
The BB official said that the credit flow to the private sector in November and December, the data of which are not published yet, might decrease to below 18 per cent due to a lower loan disbursement by the banks to the industrial sector.
He said that the liquidity pressure in the scheduled banks had recently eased due mainly to a declining trend of opening and settlement of letters of credit.
Banks may face a liquidity problem again in the coming days when they will open LCs, he said.
The government will be forced to go for an increased bank borrowing in the coming months as the net investment in the savings certificates and bonds declined heavily in the first five months of the FY 2012-13, the BB official said.
The Directorate of National Savings data showed that the net investment in the savings instruments in July-November of this fiscal year had stood at Tk 385.32 crore, 32.43 per cent lower than the figure of Tk 570.32 crore during the same period of the FY 2011-2012.
The government has a target of mobilising a net amount of Tk 7,400 crore in the FY 2012-13 from the saving instruments.