Government Borrowing Doubles in Six Months

Government borrowing from domestic sources has surged sharply in the first half of the current fiscal year, with bank loans alone crossing the significant threshold of over fifty thousand crore taka. According to the latest data released by Bangladesh Bank, the rise reflects a marked shift towards bank-dependent financing amid slowing activity in non-bank channels.

Sharp rise in bank borrowing

During July–December of the 2025–26 fiscal year, the government’s net borrowing from the banking system reached approximately 53,386 crore taka. This figure represents more than half of the annual bank borrowing target of 104,000 crore taka set in the national budget, indicating an accelerated pace of domestic financing within just six months.

In contrast, during the same period of the previous fiscal year (2024–25), bank borrowing stood at only 6,740 crore taka. This means that bank borrowing has increased nearly eightfold year-on-year, highlighting a significant structural shift in the government’s funding pattern.

Decline in non-bank financing

While bank borrowing has surged, financing from non-bank financial sources has declined sharply. In the first half of the current fiscal year, borrowing from this sector stood at 8,861 crore taka, compared with 24,688 crore taka in the same period of the previous year.

The total annual target for non-bank borrowing is set at 21,000 crore taka, suggesting that half-year performance remains moderate but significantly lower than last year’s pace.

Savings instruments, once a dominant source of government borrowing, have also lost momentum. Net borrowing from savings certificates amounted to 2,461 crore taka in the first six months, reflecting reduced investor appetite due to comparatively lower returns.

Overall domestic borrowing trend

Total domestic borrowing—including both banking and non-banking sources—reached 62,246 crore taka in July–December 2025–26, nearly double the 31,428 crore taka recorded in the same period of the previous fiscal year.

Comparative overview

Structural shift in financing

Economists note that the government’s growing reliance on the banking sector reflects subdued private investment activity, which has left more liquidity available for public borrowing without immediate crowding-out pressure. However, they also caution that this situation could reverse if investment demand picks up, potentially increasing competition between the public and private sectors for bank credit.

The overall borrowing trend suggests that fiscal operations during the first half of the year were heavily concentrated on financing routine expenditure rather than large-scale development spending. Analysts further observe that much of the borrowing took place during a period when administrative activity was relatively restrained under interim governance arrangements, contributing to a reliance on short-term financing tools.

Outlook

With the full-year domestic borrowing target set at 125,000 crore taka, including 104,000 crore from banks and 21,000 crore from non-bank sources, the government’s mid-year performance indicates that a substantial portion of financing requirements has already been met. The coming months will be crucial in determining whether borrowing stabilises or continues at an accelerated pace, particularly if investment conditions in the broader economy begin to improve.