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A bank employee counts banknotes
The government is relying heavily on internal borrowing to finance enhanced salaries for public servants under the new ninth pay scale, scheduled to take effect from November 1. Although authorities initially planned to fund the wage hike by expanding domestic revenue mobilization, stagnant tax receipts—coupled with mounting expenditures on power, energy subsidies, and foreign debt servicing—have compelled the administration to mobilize funds from the central bank, commercial banks, national savings certificates, and treasury instruments.
To cover immediate obligations, including three months of retroactive arrears from July to September alongside October salaries, the government borrowed an additional Tk 5,000 crore on Wednesday (October 28) through a 14-day special treasury bill. Central bank data indicates that this issuance pushed total domestic borrowing via treasury bills and bonds to Tk 60,300 crore in October alone, following Tk 56,000 crore raised in July. Over the first quarter of the 2026–27 fiscal year, net government borrowing from the banking sector surpassed Tk 24,245 crore, with commercial banks providing Tk 23,227 crore.
Implementation of the ninth pay scale for nearly 1.4 million active public servants and 900,000 pensioners is estimated to require an additional annual expenditure of Tk 105,580 crore, against an initial budget allocation of Tk 44,000 crore. Compounding budgetary strain, external debt servicing has outpaced fresh foreign assistance: official data shows the government paid $1.35 billion in principal and interest during the first quarter while receiving only $662.31 million in foreign aid, resulting in a net external outflow of roughly $689 million.
Economists caution that relying on commercial banks and treasury debt to manage operational wage obligations risks dampening private credit, slowing growth, and accelerating inflationary pressures. Financial analysts emphasize that without substantive revenue collection reforms, persistent debt accumulation will elevate sovereign repayment liabilities and further reduce consumer purchasing power.
