The government will go for hefty borrowing from the banking system to partly finance budget deficit for the fiscal year 2020-2021.
Its bank borrowing is set to climb 79 per to Tk 849.80 billion for the FY'21 from Tk 473.64 billion a year ago, according to the document of the budget unveiled on Thursday.
Under the arrangement, the government will borrow Tk 536.54 billion by issuing long-term bonds while the remaining Tk 313.26 billion will come through treasury bills (T-bills).
Meanwhile, the government has increased its bank borrowing target by more than 74 per cent to Tk 824.21 billion from the original goal of Tk 473.64 billion for the FY' 20.
Talking to the FE, a senior official of the Bangladesh Bank said on Wednesday that the falling trend in sales of national savings certificates and lower revenue collection has prompted the government to scale up borrowing from banks.
Senior bankers, however, expressed concern over such higher bank borrowing target, saying that it might adversely impact the country's money market if the entire amount is borrowed from banks.
"Private sector credit growth will be hampered if the government borrowed the total amount from the banks," Syed Mahbubur Rahman, managing director and chief executive officer (CEO) of Mutual Trust Bank Limited, told the FE.
Mr. Rahman, a former chairman of the Association of Bankers, Bang-ladesh (ABB), said: "We'll urge the central bank to devolve major portion of the borrowed amount on its own accounts, which would help boost money supply in the market."
Currently, four T-bills are being transacted through auctions to adjust the government's debt from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.
In contrast, the government slashed the target for borrowing from non-banking sources, particularly national savings schemes to close, in part, its budget gap.
The government is set to borrow Tk 250.03 billion from the non-banking sources in the next fiscal from Tk 300 billion the year before, said the budget document.
The ministry of finance has already halved its non-bank borrowing target to Tk 149.24 billion to finance the budget deficit of the outgoing fiscal year ending on June 30 from Tk 300 billion.
The target for net sales of savings tools has also been slashed by nearly 56 per cent to Tk 119.24 billion from the original one of Tk 270 billion, according to official figures.
The government is set to borrow Tk 200 billion in the upcoming fiscal year by selling savings instruments, down from Tk 119.24 billion of the revised target for FY' 20.
