The government has amended the auction calendar to borrow Tk 55 billion more from the scheduled banks to meet the budget deficit only for this month as a falling trend of surplus funds in its accounts, officials said.
The ministry of finance has re-fixed its borrowing target from the country's banking system at Tk 85 billion instead of Tk 30 billion earlier for May 2021 to meet budgetary expenditures.
The government may take out up to Tk 220 billion instead of Tk 165 billion earlier in gross borrowing from the banking system for the month of May by issuing treasury bills (T-bills) and bonds, according to the amended auction calendar, issued by the Bangladesh Bank (BB), on Monday.
This calendar gives the schedule and the amount of T-bills and bonds to be issued through auction for raising funds from the market to meet the government's budget deficit.
The government's net bank borrowing may reach Tk 85 billion in May after deducting Tk 135 billion against the government securities that would be matured in the month, the officials added.
"We'll start execution of the amended auction calendar from Tuesday in line with the ministry of finance advice," a BB senior official told the FE.
He also predicted that the government bank borrowing would increase substantially for the next month.
Such borrowing normally increases in the last two months - May and June - of each fiscal year because of releasing funds against execution of the various development projects across the country.
Meanwhile, the surplus liquidity in the government accounts has maintained a falling trend recently following higher implementation of the annual development programme (ADP) particularly in April.
Although there was a big jump in ADP execution in a single month in April (7.17 per cent), the overall implementation rate for the 10-month of this fiscal year (FY), 2020-21, remained poor, according to the Implementation Monitoring and Evaluation Division (IMED) latest report.
It showed that all the government ministries and agencies executed only 49.09 per cent of their ADP, the lowest in more than a decade.
The amount of excess funds in the government accounts came down to Tk 50 million this week from Tk 170 billion in the last week of April, another central banker said.
The ministry of finance had finalised the original auction calendar for May considering the government's excess liquidity in the last week of April, he explained.
Talking to the FE, an official familiar with the government's debt management activities said the government had preferred to borrow from the market instead of the central bank through amending its auction calendar to avert possible inflationary pressure on the economy.
Currently, the government is eligible to borrow Tk 120 billion through using the ways and means advances (WMAs) along with the overdraft (OD) drawing facilities from the central bank to partially meet the budget deficit, he added.
Under the existing rules, the government is empowered to borrow a maximum of Tk 60 billion from the central bank's WMA facility without issuing any securities.
After availing the WMAs facility, the government may use OD drawing facility from the central bank as well in case its negative account balance crosses Tk 60 billion.
"The yields on government securities are likely to rise in the near future if the government's higher bank borrowing continues," a senior executive of a leading private commercial bank (PCB) told the FE while explaining the impact on high borrowing of the government.
Earlier, the government had set a higher borrowing target from the banking system to partly finance the budget deficit in FY'21.
Its original target was Tk 849.80 billion in the current fiscal, up from Tk 473.64 billion a year ago, according to the budget documents.
In February 2021, the government slashed its bank borrowing target by more than 3.0 per cent to Tk 820 billion for FY'21, compelled by lower execution of the ADP.
Currently, three T-bills are being transacted through auctions to adjust government borrowing from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years are traded in the money market.