In the upcoming budget, the government plans to reduce its reliance on bank loans compared to the current fiscal year. The total budget size is expected to shrink by around Tk 7,000 crore, with bank borrowing projected to drop by about Tk 12,500 crore. Analysts and the central bank suggest that due to sluggish investment demand, the government won’t face pressure to borrow heavily from banks to cover the deficit. Instead, emphasis will be placed on boosting revenue collection.

Traditionally, the budget deficit has been financed through a mix of domestic and foreign sources, with bank loans playing a major role. In the current fiscal year, the government planned to borrow Tk 137,500 crore from banks, of which Tk 108,371 crore had already been borrowed by mid-May.

With private sector loan demand currently low, experts believe the reduced bank borrowing won’t significantly disrupt the financial sector. Economist Dr. Helal Uddin noted that decisions should consider the political and economic climate ahead of the national election, and that low private demand minimizes the impact of government borrowing.

The next fiscal year’s budget is likely to be around Tk 7.9 trillion, with a projected deficit of Tk 2.26 trillion. Bank borrowing is expected to be about Tk 1.25 trillion. Bankers, however, warn that if political stability returns, loan demand may rise quickly, potentially tightening liquidity. BRAC Bank Vice Chairman Faruq Mainuddin emphasized that stronger business activity and increased investment could reignite demand for loans, which must be factored in.

With the scaling down of several large projects initiated by the previous administration, development spending is expected to decrease, easing pressure on loans. According to Bangladesh Bank spokesperson Arif Hossain Khan, the government will now prioritize practical and need-based project planning, reducing its dependence on banking sector funds for development projects.

As per central bank data, private sector credit growth stood at 7.57% in March 2025, while public sector borrowing increased by 16.32%. Experts warn that excessive government borrowing from banks could hinder private credit growth and increase interest expenses, which are ultimately paid from tax revenues. Therefore, careful balancing will be crucial in the new budget.