Bangladesh’s private sector risks a tightening credit environment as government borrowing from the banking system has surged to nearly Tk 60,000 crore in the first half of the current fiscal year, raising concerns about reduced lending capacity for businesses.
According to Bangladesh Bank data, the government’s net borrowing from banks reached Tk 59,756 crore between July 1 and January 4 of FY2025–26.
The amount accounts for more than 57 percent of the full-year borrowing target of Tk 1.04 lakh crore, surpassing the halfway mark well before the fiscal year’s midpoint.
The pace of borrowing marks a sharp escalation from a year earlier. In the same period of FY2024–25, the government’s net bank borrowing stood at Tk 8,312 crore, meaning the current figure represents an increase of 619 percent.
Although the government initially repaid a small portion of its bank liabilities at the start of the fiscal year, borrowing accelerated rapidly amid mounting fiscal pressures.
Economists cite a combination of revenue shortfalls, declining foreign aid and rising expenditure commitments as key drivers behind the shift.
“The government is not meeting its revenue targets, and expected foreign loans are not arriving on time,” said Towfiqul Islam Khan, economist and additional research director at the Centre for Policy Dialogue (CPD).
"Consequently, the government is forced to lean on the domestic banking sector to cover the deficit," he said.
Bangladesh Bank data show the government’s total outstanding debt to the banking system has 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 taken from the central bank.
Business leaders warn that heavy public-sector borrowing risks crowding out private investment by absorbing a significant share of available bank liquidity.
Reduced access to credit could delay investment decisions, constrain production capacity and slow job creation, they say.
Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank Limited, said the banking sector has been navigating a difficult period amid a broader erosion of confidence.
He noted that while the economy and banking system have stabilised, growth has slowed due to the impact of “severe mismanagement of the macroeconomic situation”.
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“Excessive government borrowing reduces the capacity of banks to support the private sector,” said Abdul Haque, a prominent business leader and former director of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).
“This hampers employment and has a negative ripple effect across the entire economy," he said.
Analysts caution that unless revenue collection improves and public spending is managed more effectively, continued reliance on bank financing could undermine private-sector activity and weigh on Bangladesh’s longer-term economic growth.