Staff Correspondent: The government’s borrowing from the local banking and other sources in the first 8 months of current fiscal year stood at about Tk 8,054 crore for financing budget deficit. Government s domestic borrowing sources including Bangladesh Bank and other scheduled banks are
frequently increasing day by day due to massive short of revenue income. The government borrowed net of Tk 8,053.77 crore from the domestic sources during July-February of FY 2013.
The government s domestic borrowing was more or less stable during July-September 2012 but thereafter it went pick in October 2012 (stood at Tk 9,507.71 crore), after that it showed diminishing trend and stood at Tk 6,931.94 crore at the end of December 2012. Later, government domestic borrowing stood at Tk 9,590.44 crore at the end of January 2013. After that government borrowing showed slightly lower than the previous month and stood at Tk 8,053.77 crore at the end of February, 2013.
In October 2012, it is observed that government borrowed more from Bangladesh Bank, Scheduled Banks as well as nonbanking sources and stood at Tk 8,096.28 crore to meet its expenditure but it was lowest at the end of September 2012.
Government borrowed from BB mainly through overdraft which stood at Tk 4,610.40 crore in October 2012, and it contributed to a sharp increase in the total government domestic borrowing. On the other hand, government s borrowing declined from BB and non-banking sources in November 2012 as well as in December 2012.
But the borrowing sharply increased from BB, Scheduled Banks and non-banking sources during the month of January, 2013. Later, government’s borrowing sharply declined from BB, Scheduled Banks and non-banking sources at the end of February 2013.
Government borrows mainly through Treasury Bonds followed by Treasury Bills, advances to other ministries and autonomous bodies, and NSD instruments during July-February of FY13.
The budget target for government borrowing from domestic sources was fixed at Tk 33,484 crore in FY13, of which Tk 23,000 crore and Tk 10,484 crore were targeted to borrow from banks and other than banks respectively. The government borrowing stood at Tk 6,433.90 crore (net) from the banking system during July-February of FY13, which covered 27.97 percent of budget target. On the other hand, government borrowing stood at Tk 1,619.87 crore from other than banks, which covered only 15.45 percent of budget target. During July-February of FY13 government borrowing contributed only 33.50 percent out of total non-bank borrowing through NSD instruments. Total government domestic borrowing (Banking and Non-banking sources) covered 24.05 percent of total budget target during July-February of FY13.
Government domestic borrowing as a
percent of GDP was slightly decreased during the FY12 as compare to the previous fiscal year.

Staff Correspondent: The World Bank’s new Country Assistance Strategy (CAS) for Bangladesh for FY2011 to 2014 envisions doubling support to help Bangladesh to reduce poverty to 15% of the population and achieve middle-income status by 2021. The new CAS was publicly launched recently in Dhaka. The launch event continues a process of regular multi-stakeholder consultations that keep the new strategy aligned to the country s highest development priorities. The CAS builds on Bangladesh s surprisingly strong track record on growth and human development over the past decade. The country has grown by nearly 6 percent per annum, significantly reducing poverty while staying on track to achieve Millennium Development Goals related to infant and child mortality, gender equality and school enrollments. The new strategy supports the country’s ambitious aspirations to reduce the poverty rate from 40 to 15 percent and achieve middle-income status by 2021. It proposes record levels of technical and financial support, including IDA lending of more than $6 billion in the coming four years based on continued strong country performance.
“The new country assistance strategy proposes a doubling of financial support for Bangladesh relative to the FY06-09 strategy,” said World Bank source. “To deliver this higher volume of support more effectively, we will work with government to shift to larger, more strategic interventions that enhance selectivity and leverage priority reforms and investments. We will seek to scale up projects and programs that have demonstrated results and a high degree of country ownership.”
Ramping up to accelerate growth and reduce vulnerability
Bank Group support will emphasize accelerated, sustainable and inclusive growth underpinned by stronger governance at central and local levels.
To accelerate growth, the Bank will ramp up proposed investments in economic infrastructure, particularly to address severe energy deficits, urban congestion and poor transport connectivity. This includes $1.0 billion in proposed investment in power and gas, as well as $1.2 billion for the Padma Bridge, which is a priority to unlock the potential of the country s lagging Southwest Region.
For more sustainable growth, Bank strategy will include for the first time a priority to reduce vulnerability to the effects of climate change by increasing investments in water resources management, agricultural adaptation, environmental protection and disaster preparedness.
To promote more inclusive growth, the Bank will maintain long-standing support for human development and social welfare. This includes second-generation sector-wide approaches in education and health, with an increasing focus on education quality and skill building and on lagging maternal health and nutrition outcomes.
To strengthen governance, the Bank will selectively target support to areas with sufficient political commitment to achieve results. This will include scaling up on-going support to enhance core governance and strengthen local government, as well as efforts to empower communities and build demand for good governance and accountability at the local level.
A cross-cutting dimension of the new strategy is fostering regional cooperation in South Asia. The Bank Group will build on new opportunities for enhanced cooperation particularly in cross-border infrastructure networks and management of natural resources.
Strengthening the focus on results
The new strategy has been articulated around a results framework that includes a more manageable set of indicators and measurable targets. A lesson learned from the previous strategy was the need to strengthen monitoring during implementation. This time, the Bank s Bangladesh team will maintain multi-sectoral outcome teams responsible for monitoring of progress towards results in each area. Monitoring of the strategy will be linked to regular portfolio reviews.
An important element of getting better results will be a continued focus on reducing corruption risks in the Bank s portfolio. This will include stronger diagnostics and risk assessment, a shift to larger, more strategic operations and greater reliance on community-based accountability mechanisms. As part of a broader Demand for Good Governance initiative, third-party monitoring will be extended to flagship operations across the portfolio.
In partnership, the Bank group will work to strengthen country capacity to manage for results, as part of a broader Joint Cooperation Strategy aimed at enhancing aid effectiveness. The Bank will play a leading role in working with Government and other stakeholders to define a national development results framework. This framework could serve as a common performance assessment tool aimed at reducing transaction costs and increasing external resource mobilization for Bangladesh.

Staff Reporter: Provisioning requirement of commercial banks increased 25 percent in the first quarter of 2013 from the previous quarter on the back of rising classified loans. Some Tk 30,410 crore needed to be set aside as provisioning for the quarter that ended on March 31, 2012, up from the previous quarter’s Tk 24,239 crore, according to data from the central bank.
But the banks have managed Tk 20,952 crore, meaning a provisioning shortfall of Tk 9,458 crore.
“Political unrest and various scams in recent times have significantly pushed up the amount of classified loans, and hence the need for greater provisioning,” an official of a state-run bank said.
Total classified loans on March 31, 2013 stood at Tk 51,019 crore, up 19.4 percent from the quarter that ended on December 31 last year. In the event that the classified loans default, banks have to set aside an amount to cover the potential loss and ensure solvency. This, essentially, is called loan-loss provisioning.
The increase in loan-loss provisioning means the bank s immediate profitability would be lower: the amount would be taken out from present income and spread across future ones.
The new loan classification rules introduced by the central bank on December 31, 2012 also had a role to play in the quarter’s higher provisioning requirement, said a high official of Bangladesh Bank.
"To enhance our loan classification policy to international standards and bring the banks out from the deep hole of default loan culture, the new policy was introduced."
Classified loans are sorted into three categories - bad, doubtful and sub-standard - with the provisioning requirement varying between them.
Under the new policy, if a loan remains overdue for three months it is classified as sub-standard; previously, the time frame was six months.
"The banks provisioning requirements multiplied as a result," the BB official said, adding that the borrowers would not be affected.
The overdue borrower would not be identified as a defaulter and continue to receive fresh loans, he added. "A special facility has been created for them."
Of the quarter s total classified loans, 19.3 percent, or Tk 9,829 crore, accounts for sub-standard loans.

Staff Reporter: Bangladesh s soil fertility mainly depends on yearly flood which brings huge quantity of silt in the rivers. But because of improper application of low quality chemical fertilisers and spurious fertilisers the soil is losing its fertility. It has virtually reached the lowest point, less than one percent of organic content. Some officials of the department of agriculture have expressed apprehension that if the natural health of Bangladesh soil continues to deteriorate it may not be able to produce food adequately by the year 2020 to feed its ever increasing population. It is a challenge to feed over 150 million people with diminishing arable land, and regular visit of natural calamities. The ministry of agriculture is supporting the agriculturists. It is however, worried about the threat of spurious fertilisers which are reportedly flooding markets, particularly in the western part of the country. Some people are desperate about making money through unfair means despite the good intention of the relevant government departments. It is reported that marketing of spurious fertilisers is growing rapidly. In a recent study by the Soil Research Development Institute has ascertained the percentages of application of spurious fertilisers.
Apart from this, low quality chemical fertilisers are also entering the country. No effective step has been taken so far to stop this illegal trade. Plants get thirteen kinds of nutrients mainly from soil out of their need for sixteen kinds. Due to intensive cultivation for a long time soil loses nutrients. SRDI has done survey of soil on an upazila basis in the last two decades. Based on the survey farmers can be motivated to apply of fertilisers in right dozes. The authorities should urgently take strong punitive measures against marketing of spurious fertilisers to save the soil and its productivity.