Bangladesh’s Planning Commission has raised concerns that rising public sector borrowing from commercial banks may be crowding out credit to the private sector, posing a risk to investment and economic recovery.

The warning comes from the General Economic Division (GED) in its May issue of Economic Update and Outlook, released Saturday. The government think tank noted that public borrowing surged 60% year-on-year, reaching Tk 985.79 billion by mid-April.

The sharp rise follows sluggish revenue collection and a halt in direct central bank financing. The report said this increased dependence on commercial bank borrowing could constrain credit availability for private businesses.

Although deposit and private sector credit growth picked up in April—a sign of gradual economic recovery—GED emphasised that boosting public revenue and reducing reliance on bank borrowing are vital for fiscal sustainability and investment.

The report also noted a slight easing of inflation in April, largely due to falling food prices. However, rice and fish remained key inflation drivers. To manage food supply risks, GED recommended maintaining a strategic buffer stock of rice.

Amid rising subsidy costs and tight fiscal space, GED urged the prioritisation of targeted social safety net programmes in the next national budget. Suggested measures include school feeding, food-for-work schemes, open market sales, and guaranteed employment programmes.

While remittance inflows rose and the exchange rate remained stable, export growth dipped slightly in April. The GED also called for a critical review of past tax reform efforts before implementing the National Board of Revenue’s new long-term strategy to raise the tax-to-GDP ratio.