Public Borrowing from Banks Soars, Threatening Business Lending Capacity

Bangladesh’s private sector faces growing pressure on access to bank credit as government borrowing from the banking system has surged sharply in the first half of the current fiscal year.

Central bank data show that the government’s net borrowing from banks reached Tk 59,756 crore between July 1 and January 4 of fiscal year 2025–26. This amount already represents more than 57 percent of the full-year borrowing target of Tk 1.04 lakh crore, crossing the halfway mark well before the fiscal year’s midpoint.

The pace of borrowing marks a dramatic rise compared with the same period a year earlier, when net government borrowing from banks stood at Tk 8,312 crore. The latest figure reflects an increase of 619 percent year-on-year.

Although the government repaid a small portion of bank liabilities at the start of the fiscal year, borrowing accelerated rapidly as fiscal pressures mounted. Economists point to weak revenue collection, delays in foreign financing and rising expenditure commitments as the main reasons behind the increased reliance on domestic banks.

According to Bangladesh Bank data, the government’s total outstanding debt to the banking system has now climbed to Tk 6.10 lakh crore. Of the borrowing undertaken so far this fiscal year, Tk 35,750 crore has come from commercial banks, while Tk 24,006 crore has been sourced from the central bank.

Business leaders warn that such heavy public-sector borrowing could crowd out private investment by absorbing a significant share of available bank liquidity. Limited access to credit may delay investment plans, restrict production capacity and slow job creation.

Bankers note that although the financial system has shown signs of stabilisation, overall economic growth has remained sluggish due to prolonged macroeconomic challenges. Analysts caution that unless revenue mobilisation improves and public spending is brought under tighter control, continued dependence on bank financing could undermine private-sector activity and weigh on long-term economic growth.