In an effort to promote a robust domestic debt market, the Bangladesh government is strategizing to increase its share of marketable securities in the coming years. According to a recent Finance Ministry document, the administration is also committed to continued issuance of Islamic securities Sukuks but has currently shelved plans for Eurobond issuances on the global market.
As fiscal deficits loom, with projections showing a deficit of Tk 2792.3 billion for FY 2024-25 and Tk 3170.7 billion for FY 2025-26—equating to 5% of GDP each year—the government underscores the need for strategic domestic borrowing.
The focus remains on minimizing borrowing costs through traditional external creditors, which are preferred, the document detailed.
The strategy for addressing deficits includes an ambitious target of collecting Tk 1200.3 billion from external sources in FY 2024-25 and Tk 1306.4 billion in FY 2025-26, each constituting 2.1% of GDP.
Domestic sourcing is expected to contribute significantly more, with plans to collect Tk 1677.7 billion and Tk 1864.4 billion over the same periods, representing 2.9% of GDP.
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Significantly, the banking sector is anticipated to contribute Tk 1384.9 billion in FY 2024-25 and Tk 1547.3 billion in FY 2025-26. In comparison, non-banking sectors will contribute Tk 292.8 billion and Tk 317.1 billion respectively.
Savings certificates will add Tk 191.4 billion and Tk 190.3 billion, while other sources are projected to contribute over Tk 100 billion annually.
The government maintains a prudent deficit financing policy to stave off debt distress, keeping the deficit steady at around 5% of GDP and maintaining a stable debt level at around 33% of GDP in recent years, the finance ministry document explained. This balanced approach aims to mitigate the risks associated with deficit financing while prioritizing sustainable economic development.
In terms of the medium-term outlook, the government expects domestic borrowing to remain stable at 2.9% of GDP. However, the approach to marketable securities will see a significant nominal increase, with a planned reduction in the reliance on higher-cost National Savings Certificate instruments, which will see a gradual decrease in their contribution to the financing mix.
External financing is also projected to increase nominally between FY 2023-24 and FY 2025-26, driven by greater disbursement for large projects and increased budget support, though dependent on the pace of project implementation.
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Bangladesh has received considerable budget support from external sources in recent years, a trend expected to continue in the medium term, the document stated, highlighting the ongoing commitment to leveraging both domestic and international financial strategies to meet fiscal challenges.