The government’s non-bank borrowing from unconventional sources has been growing fast, driven by its needs to meet higher public spending.
Apart of savings tools, non-bank instruments include provident fund, public deposits kept in the national exchequer as security required for procurement rules and legal suits and government payables.
This type of borrowing by the government shot up by more than 33 per cent to Tk 242 billion during the first four months of the fiscal year compared with the year-earlier period, according to official documents.
The figure represents almost half the annual borrowing target from domestic non-banking sources.
The government targets borrowing a total of Tk 469 billion from these sources, which usually help ease deficit financing. The amount targeted in the current budget is much higher than those of previous fiscal years.
Similarly, the net bank borrowing by the government was Tk 307 billion during the period, up from just Tk 2.53 billion a year ago.
Officials at the ministry of finance said that such type of borrowing remained almost unutilised in the past, because the government relied on national savings instruments to meet public expenditure.
But sales of savings instruments declined significantly during the period due to complicated procedures and tax imposition.
The borrowing from savings tools was merely Tk 59.2 billion during July-October of this fiscal year against Tk 182 billion borrowed during the same period previous fiscal.
They said that borrowing from such non-traditional instruments climbed, as the government is taking the adverse impact of huge bank borrowing on the financial market into consideration.
For example, the government took out substantial amount of fund from deposits source. The contractors and other people have to keep deposits with the government following the existing public procurement rules and meet unforeseen expenses related to civil and criminal suits.
From the deposit source, the government borrowed Tk 187 billion during July-October, up over 85 per cent higher than the corresponding period of the last fiscal.
Civil servants can now opt for deposits between 5.0 per cent and 25 per cent of their basic salaries with the national exchequer and can get it back during their retirement.
The government usually allocates basic salaries of around 1.2 million public employees in the budget.
While deducting certain amount from the basic salaries as contribution to the provident fund, the government gets a good amount each month from which it used Tk 4.28 billion during July-October.
Though the government can use the fund, it needs to pay interest at the rate of 12 per cent regardless of its status, either used or idle.
Of the Tk 5.23 trillion budget for the current fiscal, the government predicts Tk 1.45 trillion, or 5.0 per cent of gross domestic product, or GDP, as deficit.
It projects Tk 638 billion to come from foreign sources while Tk 773 billion from domestic sources.
Of the domestic sources, Tk 473 billion will come from the banking system through issuing bills and bonds. And the rest will come from savings instruments and other sources.