Domestic Bonds

Marginal increase in Bangladesh government liabilities likely in 2021-2022

| Update:
June 12, 2021, 9:00 a.m.

The government’s liabilities in the next fiscal year (fiscal year), 2021-2022, are expected to increase slightly as its domestic liabilities, which generally become higher than foreign loans, are expected to shrink to some extent.

Total government liabilities – domestic and foreign – could increase by over 6.0% to Tk 3.4 trillion in FY 2021-22. The amount usually increases by two digits.

Liabilities, primarily domestic and foreign debts, are payments for goods and services, which the government has subcontracted but has yet to make.

The government has an obligation to settle the amount during the next fiscal year, ending June 30. It is also a constitutional obligation.

Domestic liabilities consist of debt securities, loans and other debts. Other debts include bills and bonds issued by the government to create debts with the banking system, payment of interest and repayment of principal.

On the other hand, external liabilities consist only of foreign loans.

Previously, government lending targets from domestic sources climbed 56% in the initial budget for fiscal year 2020-21, according to the annual financial report.

However, over the next fiscal year, domestic liabilities are expected to decline by 5.0 percent to around Tk 2.3 trillion. In the revised budget for the current financial year, the amount is Tk 2,400 billion.

In addition, external liabilities could amount to around Tk 1.2 trillion, up 38% from the revised estimate. In the revised budget for fiscal year 2021, the amount is Tk 857 million.

Central bank officials told FE that government borrowing from the banking system has been reduced to a large extent in the outgoing fiscal year.

They said the government mainly repays loans to the banking system. This higher debt repayment ultimately reduced the burden of its domestic debt.

Apart from that, the government estimated a lower borrowing target from the banking system in the next fiscal year.

The government estimated that it would borrow Tk 764.5 billion (net) from the banking system, down more than 4.0 percent from the revised estimate in the current budget.

On the other hand, a finance ministry official said the external debt liabilities would increase, but the debts are mainly budget support – provided by many multilateral institutions.

“We have negotiated most of the loans at an interest rate of 2.0%, which will actually reduce our liabilities,” said Sirajun Noor, co-secretary in the Finance Division.

On June 3, AHM Minister of Finance Mustafa Kamal proposed a budget of Tk 6.03 trillion for the next fiscal year.

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