The government's bank borrowing is set to rise further in June as the execution of the Annual Development Programme (ADP) gained momentum, but revenue collection fell short of target.
The authorities have targeted net bank borrowing at nearly Tk 99 billion for June 2019 to finance the budget deficit, according to the auction calendar, issued by the Bangladesh Bank (BB) recently.
According to the calendar, the government may take up to Tk 228 billion as gross borrowing from the banking system this month by issuing treasury bills (T-bills) and bonds.
The government's net bank borrowing is set to reach Tk 98.90 billion by the end of June, after deducting Tk 129.10 billion as maturity amount of the government securities from the gross borrowing amount, central bank officials said.
Besides, Tk 20 billion will be borrowed through issuing short-term 14-day T-bills on Monday, which will be cleared on June 25, they said.
Central bankers have ruled out any negative impact.
"There will be no additional impact on the overall net borrowing of the government for June," a senior BB official said about the short-term bill.
He also said the government borrowed Tk 40 billion on Sunday through issuing 91-day T-bills, 182-day T-bills and 364-day T-bills on Sunday as per the auction calendar.
The BB, however, devolved Tk 22 billion on its own accounts while the remaining Tk 18 billion was borrowed from commercial banks.
The higher borrowing worries senior bankers, though .
They expressed concern over such higher bank borrowing of the government, saying that it might adversely impact the money market if the entire amount is borrowed from the scheduled banks.
They urged the central bank to devolve major portion of borrowing amount on its own accounts, which would help boost money supply in the market.
"We'll act considering the overall market condition," a member of auction committee told the FE about the devolvement strategy.
Normally, the implementation rate of ADP picks up pace during the last two months of each fiscal year, according to the bankers and officials.
Besides, revenue shortfall is forcing the government to borrow more from the banking system to partly meet the budget deficit, they noted.
The National Board of Revenue (NBR) had faced more than Tk 504 billion shortfall against its target in the July-March period of the current fiscal year (FY) 2018-19.
Meanwhile, the government has used around Tk 22 billion as on May 28 borrowed under ways and means advances (WMAs) facility from the central bank to meet its budgetary expenses, an official familiar with the government debt management activities said.
The authorities are now empowered to borrow up to Tk 40 billion from the central bank under the facility to meet its day-to-day expenditure without issuing any securities.
Besides, the government is entitled to borrow a maximum of Tk 40 billion through overdraft (OD) drawing facility from the central bank on the same ground.
"But the government did not avail such a facility from the BB until May 28," the official noted.
The ministry of finance had set a bank borrowing target of Tk 420.29 billion for the FY 19 to part-finance the budget deficit.
Under the proposed bank borrowing, the government will borrow Tk 239.65 billion by issuing long-term bonds, while the remaining Tk 180.64 billion through T-bills.
Currently, four T-bills are being transacted through auctions to adjust the government's borrowing from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
Also, five government bonds with tenures of two, five, 10, 15 and 20 years respectively are traded in the market.
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