Government borrowings from the banking system were unusually high in 2007-08 compared to recent trends as it grew more than 30 percent, despite a substantial 32 percent decline in credit to other public sector.

"Increased spending on food, fuel and fertilizer might have stimulated the borrowings from the banking system," a senior Bangladesh Bank official told UNB yesterday.

According to the latest figures the central bank reviewed late last week, net credit to the government sector increased to about Tk 47,000 crore at the end of June this year from Tk 36,000 crore at the end of June last year.

Credit to other public sector decreased by 32 percent to Tk 11,840 crore in June this year from Tk 17,455 crore in the previous June.

The BB official said that the borrowing of public sector from the banks decreased significantly due to the budgetary provision of Tk 7,523 crore against the liability of Bangladesh Petroleum Corporation (BPC), the major borrower.

The latest figure, however, show that private sector credit increased 25 percent during the last fiscal year as compared to a 15 percent growth in 2006-07.

Total domestic credit registered a faster growth at 21 percent in 2007-08, compared with about 15 percent in the previous fiscal due to a significantly slow growth in government sector supported by the budgetary provision.

"The faster growth in total domestic credit, including private sector credit, has been more or less satisfactory in the context of GDP growth projection at 6.2 percent and inflation," said the Bangladesh Bank review.

It said the consumer price inflation on 12-month average was 9.94 percent at the end of June this year (point-to-point 10.04 percent) as compared to 7.2 percent (point-to-point 9.2 percent) at the end of June last year.

Money supply increased slightly by 17.6 percent in the last fiscal year from 17 percent growth of the previous fiscal year.

The intensity of classified loans of the total outstanding credits by commercial banks dropped marginally to 13 percent at the end of June this year from about 14 percent at the end of June last year.

Agriculture credit disbursement stood at Tk 8,581 crore during the last fiscal year as compared to the period's

target of Tk 8,309 crore.

Bangladesh Bank has set the credit target at Tk 9,379 crore for the current fiscal year to accelerate the rehabilitation of Sidr-affected agriculture sector and boosting agriculture production.

During the last fiscal year, investment in national savings certificates declined drastically to Tk 2,518 crore from Tk 4,174 crore of the previous fiscal year.

The central bank observed a fluctuation in the inter-bank call money market recently as the weighted average rate stood at 9.41 percent as on August 19 this year, which was 6.9 percent on the same day last year. At the

end of June this year, the rate was 4.78 percent.

It said the foreign exchange market has been stable during the last two years and the US dollar was trading at an average of Tk 68.52 as on August 19. It was traded at Tk 68.52 at the end of June this year and Tk 68.53 at the end of June last year.

In 2007-08, wage earners' remittance rose by 32 percent and exports increased by about 16 percent to help the foreign exchange reserve grow significantly, said the Bangladesh Bank.

The forex reserve stood at about US$ 6.0 billion on August 19 this year, as against US$ 5.1 billion on the same day last year.