Government to Borrow Tk30,107 Crore From Banks This Quarter as Revenue Shortfall Persists

A smaller ask, but the same underlying strain

Bangladesh's Internal Resources Division has set a net borrowing target of Tk30,107 crore from treasury bills and bonds for the October to December quarter, the opening stretch of the second quarter of fiscal year 2026-27. On paper the number looks like good news. It is noticeably smaller than the more than Tk35,000 crore the government borrowed from the same market in July through September. Look past the headline figure, though, and the picture is less reassuring. The government is still leaning on domestic banks to plug a budget gap that has widened for two separate reasons at once, a revenue collection shortfall that officials now put at roughly Tk29,000 crore for the fiscal year so far, and a newly implemented public sector pay structure whose December installment alone will cost the treasury Tk37,372 crore.

The borrowing calendar, published through the Debt Management Department, sets out how much the government intends to raise via weekly treasury bill and bond auctions over the three months, money that commercial banks, insurers and other primary dealers absorb in exchange for government paper. It is a routine administrative exercise, published every quarter without fail. What economists are flagging is not the mechanism but the trend line behind it, a government increasingly dependent on its own banking system to cover day to day spending at a moment when that same banking system is already under strain from a non-performing loan ratio that remains the highest in South Asia.

Where the pressure is coming from

Two separate forces are driving the borrowing need, and neither is temporary. The first is the revenue side. The National Board of Revenue has struggled through this fiscal year much as it struggled through the last one, when full year FY26 collection landed around Tk88,000 crore short of target despite a late surge in the final two months. A separate dataset BD Financial Review examined this week shows that pattern repeating into FY27, with 29 of 34 large taxpayer units missing their VAT collection goals even as overall receipts grew. The second force is spending, specifically a new government pay scale being rolled out in phases between July 2026 and January 2028. The scheme carries a three year price tag of roughly Tk1,05,380 crore, and its second phase lands in December, adding Tk37,372 crore of fresh expenditure in a single month that the budget has to find money for somehow.

Put those two pressures together and the arithmetic explains itself. Revenue is coming in slower than planned while a major new spending commitment is arriving faster than the budget can absorb it through ordinary channels. Borrowing from the banking sector becomes the shock absorber, and the Internal Resources Division's quarterly calendar is effectively a running record of how large that shock absorber needs to be every three months.

Economists call it a warning sign, not a cushion

Fahmida Khatun, executive director of the Centre for Policy Dialogue, was blunt about what the pattern signals. She said the government's reliance on borrowing from the banking sector points to a liquidity shortage in the state's own coffers, and that scaling up this kind of borrowing is not a sustainable way to finance the budget over time. Her concern echoes what the think tank has been saying since the FY26 shortfall became clear, that a widening gap between what the government collects and what it needs to spend cannot keep being closed through the same mechanism quarter after quarter without consequences for private credit and interest costs.

Md Ezazul Islam of the Bangladesh Institute of Bank Management raised a related but distinct concern, pointing to the knock on effect for the budget itself. Borrowing from banks to finance additional expenditure, he said, will increase the government's own interest payments going forward, meaning today's shortfall gets partly financed by tomorrow's debt servicing bill. That dynamic is already visible in how Bangladesh's domestic debt servicing costs have climbed over recent budgets, and a quarter where net bank borrowing again clears Tk30,000 crore does nothing to reverse that trajectory, even if it is smaller than the quarter before it.

A banking sector already carrying weight

The timing matters because the banking sector absorbing this borrowing is not operating from a position of strength. Bangladesh Bank data released in September put the classified loan ratio at 32.78 percent as of June, still among the highest non-performing loan ratios anywhere in the world even after a 2.95 percentage point improvement over the preceding nine months. The central bank used its first quarterly monetary policy statement on September 30 to hold the policy rate at 9.5 percent and to unveil an 18 month plan aimed at accelerating recovery of those bad debts through bullet payment structures and one time exit facilities for struggling borrowers. Foreign exchange reserves, meanwhile, eased to around $36 billion from a June peak near $37.6 billion, a reminder that the external buffer available to cushion fiscal pressure has also been narrowing even as it remains well above where it stood two years ago.

None of these threads are new on their own. What the October to December borrowing figure does is connect them. A government short on revenue and carrying a fresh wage bill is turning to a banking system that is simultaneously trying to clean up its own balance sheet and operating under a central bank holding rates steady rather than easing them. Every taka the government borrows through this channel is a taka that commercial banks are not lending to private businesses, at a moment when private credit growth has already been described by the central bank as weak.

Metric	Figure
Net bank borrowing target, Oct-Dec FY27	Tk30,107 crore
Net bank borrowing, Jul-Sep FY27 (previous quarter)	Over Tk35,000 crore
Revenue collection shortfall so far this fiscal year	Roughly Tk29,000 crore
Extra pay-structure cost due in December 2026	Tk37,372 crore
Total three-year cost of new pay structure	Tk1,05,380 crore
FY26 full-year revenue shortfall (comparison)	Tk88,000 crore
Bangladesh Bank policy rate (held Sept 30)	9.50 percent

What to watch next

The real test will come with the January to March calendar, the quarter in which the pay structure's cumulative costs will have been running for a full three months rather than landing as a single December spike. If that borrowing figure climbs back above the July to September level rather than continuing to taper, it will suggest the Tk30,107 crore figure for this quarter was a brief dip rather than the start of a sustained easing. NBR's revenue performance over the same stretch, particularly whether the large taxpayer units that missed their VAT targets this year can close the gap, will do much to determine which way that number moves. For now, the quarterly borrowing calendar remains what Khatun describes it as, evidence of a government managing a persistent cash gap one quarter at a time rather than closing it.