The government has proposed reducing its borrowing from the banking sector by Tk 6,000 crore in the national budget for the 2026-27 fiscal year, a move aimed at easing pressure on banks, strengthening financial stability and restoring public confidence in the country's banking system.
Finance Minister Amir Khosru Mahmud Chowdhury unveiled the Tk 9.38 lakh crore budget on Thursday, the first full-fledged budget of the BNP-led government under Prime Minister Tarique Rahman. The proposed budget sets a fiscal deficit of Tk 2.43 lakh crore, equivalent to 3.6 percent of the country's Gross Domestic Product (GDP).
To finance the deficit, the government plans to borrow Tk 1.12 lakh crore from the banking sector, down from the revised target of Tk 1.18 lakh crore in the outgoing fiscal year. The reduction reflects the government's broader strategy to gradually lessen dependence on domestic bank financing and create greater space for private-sector investment.
Presenting the budget, the finance minister said the government is seeking to move away from a debt-driven growth model and foster a more sustainable economy powered by productive investment, higher private-sector participation and stronger financial institutions.
A major focus of the budget is the recovery and reform of the banking sector, which has faced mounting challenges in recent years, including rising non-performing loans, governance failures and declining public trust.
To support the sector's recovery, the government has earmarked Tk 40,000 crore for the recapitalisation of financially distressed banks. The allocation is intended to strengthen balance sheets, improve liquidity and safeguard depositors' interests while advancing reforms in banking governance and supervision.
The finance minister said rebuilding confidence among depositors remains a key priority. He stressed that management reforms, stronger oversight and a risk-based supervisory framework would be introduced to ensure greater accountability and transparency across financial institutions.
As part of the reform agenda, the government has initiated measures to curb political influence in banking operations, prevent undue family control over financial institutions and strengthen efforts to recover money allegedly laundered abroad.
The budget also places emphasis on diversifying financing sources to reduce pressure on the banking system. In this regard, the government plans to expand the bond market through the promotion of green bonds, sukuk bonds and corporate bonds, creating alternative channels for raising funds for both public and private-sector projects.
Economists have long argued that excessive government borrowing from banks can crowd out private-sector lending by limiting the availability of credit for businesses. The issue has become increasingly significant as private-sector credit growth recently dropped to a historic low of 4.7 percent.
Officials expect the lower government borrowing requirement to help reverse that trend and support a gradual recovery in private-sector credit growth to between 9 and 10 percent over the medium term.
Policy analysts have generally welcomed the reduction in bank borrowing but cautioned that further efforts will be needed to reduce reliance on domestic financing. They have suggested increasing the use of external funding sources and improving revenue mobilisation to ease pressure on the financial sector.
The finance minister acknowledged that the government inherited significant fiscal challenges, including high debt-servicing costs and elevated borrowing requirements. He noted that previous years saw the budget deficit rise to more than 4 percent of GDP, placing additional strain on public finances.
Looking ahead, the government aims to contain the deficit through stronger revenue collection, improved expenditure management and more efficient implementation of development projects, while maintaining macroeconomic stability and supporting long-term economic growth.
