The government's bank borrowing target is unlikely to be achieved by the end of this fiscal year (FY) due to lower implementation of the annual development programme (ADP) caused by the ongoing Covid-19 pandemic.
Higher sales of national savings certificates (NSCs) have also pushed down the borrowing from the country's banking system by the government to meet budget deficit, officials said.
The observations came against the backdrop of setting the net bank borrowing target at Tk 30 billion by the Ministry of Finance for the month of May to meet budgetary expenditures.
The government may take out up to Tk 165 billion in gross borrowing from the banking system for the single month (May) by issuing treasury bills (T-bills) and bonds, according to the auction calendar, issued by the central bank, on Thursday.
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 partly meet the government's budget deficit.
The government's net bank borrowing may reach Tk 30 billion in May after deducting Tk 135 billion against the government securities that would be matured in the month, the officials added.
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.
The government borrowed around Tk 220 billion through issuing T-bills and bonds from the country's scheduled banks during the July-April period of FY 2020-21 against its revised annual target of Tk 820 billion, according to the officials.
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.
"It is obvious that the government's bank borrowing target may not be achieved by the end of FY'21," a senior BB official told the FE on Thursday.
He also feared that the government's aggregate net bank borrowing figure is likely to turn negative by the end of FY'21 if the existing trend of expenditures continues.
"Our business planning is being hamperedseriously due to mismatch between the target and actual bank borrowing of the government," a senior executive of a leading private commercial bank (PCB) told the FE while explaining the impact on lower borrowing of the government than the target.
He also said the yield on government securities was likely to fall further if such lower borrowing continued.
Meanwhile, the implementation rate of the ADP in the first seven months of FY'21 hit a five-year low at 28.45 per cent due to a lack of capacity in utilising funds by major ministries amid the pandemic.
The government agencies spent Tk 610.48 billion, only 28.45 per cent, of the total ADP outlay during the July-January period of this fiscal year, according to Implementation Monitoring and Evaluation Division (IMED) figures.
On the other hand, the net sales of NSCs more than tripled in the first eight months of FY'21 mainly due to lower interest rate, offered by the scheduled banks, on deposits.
The government's net borrowing through selling savings tools jumped by 203.24 per cent or Tk 196.45 billion to Tk 293.11 billion during the July-February period of FY'21 from Tk 96.66 billion in the same period of the previous fiscal year, according to the official data.
Emphasising higher returns, savers, particularly small ones, now prefer investing their hard-earned money in the NSCs instead of depositing the same with the banks.
The government's savings schemes pay more than 11 per cent annualised profits, while the weighted average interest rate on bank deposits came down to below 5.0 per cent in the recent months, according to bankers.
The weighted average interest rate on deposits fell to 4.46 per cent in February 2021 from 4.51 per cent a month earlier, the BB data showed.
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.
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.