The Bangladesh government borrowed Tk 16,601 crore from the banking sector during the first two months of the current 2026–27 fiscal year, July and August, marking a 410% increase from the same period of the previous fiscal year.
During July-August of FY2025–26, the government borrowed Tk 3,256 crore from the banking sector. The amount rose to Tk 16,601 crore during the same period of the current fiscal year.
Although borrowing from commercial banks increased, the government repaid part of its borrowing from Bangladesh Bank during the period. According to Bangladesh Bank data, the government borrowed Tk 16,601 crore from commercial banks in July-August while repaying Tk 3,728 crore to the central bank. As a result, the government’s net borrowing from the banking sector stood at Tk 12,872 crore during the two-month period.
For FY2026–27, the government has set a target of borrowing Tk 1.12 lakh crore from the banking system. The borrowing during the first two months therefore accounts for 11.49% of the annual target.
People familiar with the banking sector said the increase in government borrowing is linked partly to weaker-than-targeted revenue collection. The government relies on bank borrowing to meet both its operating and development expenditures.
They also pointed to pressure on private-sector credit and continuing gas and electricity supply constraints. Under these circumstances, revenue collection has not increased in line with government requirements, they said.
Recent Bangladesh Bank data show that private-sector credit growth remained relatively subdued. In July 2026, claims on the private sector by deposit money banks increased 4.64% year-on-year, while net claims on the government increased 42.77% over the same period.
Bank officials said private-sector credit growth had fallen below 5%, meaning the government’s borrowing has not yet created significant pressure on private-sector credit availability. However, they said banks’ income has been affected as interest rates on government borrowing have declined. In some cases, the government’s borrowing rate has fallen below deposit rates.
According to the figures provided, government borrowing from commercial banks stood at Tk 6,08,025 crore as of August 30, compared with Tk 5,91,424 crore at the end of June. This represents an increase of Tk 16,601 crore in two months.
Meanwhile, the government’s outstanding borrowing from Bangladesh Bank declined to Tk 90,322 crore by August 30, from Tk 94,051 crore at the end of June.
Revenue collection has also come under pressure. VAT collection during the first two months of the current fiscal year fell by around 20% compared with the same period of the previous fiscal year, according to the information provided.
The decline in VAT collection has been attributed by relevant stakeholders to a new system under which VAT payments are made every three months instead of monthly. The government is now considering a return to monthly VAT payment arrangements.
The government borrows from banks primarily to finance operating and development expenditures. The increased reliance on bank borrowing at the beginning of FY2026–27 has renewed attention on government revenue collection and deficit financing.
Bangladesh Bank’s July 2026 macroeconomic data also show the role of the banking system in government deficit financing and the changing position of government borrowing within the banking sector.
