Interim govt to rely more on bank loans to meet budget deficit

The interim government has decided to significantly increase its reliance on domestic sources, particularly bank loans, to finance the budget deficit for the upcoming FY2025- 26.

The proposed national budget slashes borrowing targets from foreign sources and savings certificates, instead aiming to collect Tk1.04 lakh crore from the banking sector, marking an almost 5 percent increase from the revised target of Tk99 thousand crore in FY2024-25.

The budget for FY2025-26 was presented on Monday by Finance Advisor Salehuddin Ahmed in a pre-recorded televised address on Monday. The fiscal year begins on July 1.

According to the budget presentation, the total budget deficit for the upcoming fiscal year is projected to be Tk 2.21 lakh crore. Of this, 47 percent is planned to be covered through bank borrowing, an increase from 44 percent in the last fiscal year.

In the first ten months of the current fiscal year (up to May 12), the government's net bank borrowing stood at Tk56116 crore, which is 56.68 percent of the revised target. Officials antedate that the net borrowing will remain within the set limit by the end of the current fiscal year.

Conversely, the target for foreign borrowing has been reduced. As per the proposed budget, the government plans to borrow Tk96 thousand crore from external sources in FY2025-26, which is approximately 8.2 percent lower than the revised target of Tk 1.04 lakh crore for the current fiscal year.

Similarly, the government has trimmed its borrowing plans from national savings certificates. The target for the new fiscal year from this sector is set at Tk 12500 crore, a 10.7 percent reduction compared to the current year's revised target.